Russell 2000 trade idea before the FOMC today: 4.5 Risk vs Reward

Russell 2000 technical analysis and trade Idea for traders before the FOMC meetingπŸ“ˆπŸ’‘

Based on the attached chart and the highlighted guidance, here’s a detailed trade idea for Russell:

Let’s break down the key elements of this trade setup:

  • Retest:
    • The price action appears to be revisiting a previous support level (horizontal line) after a pullback. This retest suggests a potential buying opportunity if the price bounces back up. πŸ› οΈ
  • Anchored VWAP:
    • The purple line on the chart indicates the Volume-Weighted Average Price (VWAP), acting as a dynamic support/resistance zone. A retest of this area, combined with the support level, strengthens the case for a long position. πŸ“Š

Trade setup details:

  • Trade setup: Long position on Russell with a reward-to-risk ratio of 4.5:1.
  • Entry point: Place a limit buy order at 2021.8 πŸ›’
    • This entry point is just above the recent retest and the anchored VWAP, which serves as a confluence of support.
  • Stop loss: Set a stop loss at 2011.5 🚫
    • This means risking 10.3 points on the trade, ensuring a manageable risk.
  • Take profit: Aim for a target profit of 46.3 points, exiting at 2068.1 🎯
    • This target capitalizes on the potential upside with a favorable reward-to-risk ratio.

Partial profit strategy:

  • Initial partial profit:
    • Consider taking partial profits (50-80% of the position) when the price reaches the target zone πŸ“Š.
    • This approach helps to lock in gains and reduce exposure.
  • Adjust stop loss:
    • After taking partial profits, move the stop loss to the entry point (2021.8) to secure the remaining position πŸ”’.
    • This step ensures the trade remains risk-free for the remaining position.

Long-term position:

  • Swing trade potential:
    • Hold the remaining position for a longer-term swing trade, riding the potential upward momentum πŸ“ˆ.
    • This strategy allows for additional gains if the bullish trend continues.

Technical consideration:

  • Pattern analysis:
    • The trade is based on the descending wedge pattern visible in the chart, indicating a potential breakout πŸ“‰βž‘οΈπŸ“ˆ.
    • The confluence of the retest and anchored VWAP adds to the trade’s validity.

Risk management:

  • Proper position sizing:
    • Ensure proper risk management and position sizing to protect your capital πŸ”.
    • Only risk a small percentage of your trading account on any single trade to manage potential losses.

Note: This trade idea is shared for informational purposes only and is at the trader’s discretion and own risk. Always perform your own analysis and consult with your financial advisor before making any trading decisions.

This article was written by Itai Levitan at Source