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Small-Caps Play 'Catch and Release' with Key Year-to-Date Levels

The next level to watch for the iShares Russell 2000 Index ETF (IWM)

by 11/11/2013 1:24:46 PM
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My notes on the iShares Russell 2000 Index ETF (IWM) chart below were first designed to illustrate the significance of levels associated with round number year-to-date (YTD) gains (such as +10%, +20% and +25%). But as I studied the chart more carefully, I couldn't help but notice a couple of other phenomena:

  1. I eyeballed the duration from the time IWM first traded (including intraday) at each of the three levels of round number gains till the time each level was clearly left behind (what I refer to as "catch and release" on the chart), and the durations each appeared to be two months (give or take). I then computed the number of days involved for each "catch and release" and these were remarkably similar, as shown on the chart. This illustrates the "speed bump" effect of such levels on upside progress, but perhaps something more in terms of the common time frame for release. The actual catch-and-release periods are as follows: March 7 to May 3; July 11 to Sept. 10; and Aug. 5 to Oct. 14 (note the latter two periods have some overlap).

  2. It was also tough not to notice the significance this year of IWM's 80-day moving average as a support level -- and as it turns out, there were "fake out" pullbacks below the three YTD levels of interest "caught" at the 80-day, and these were shortly followed by the "release" rally. In fact, these two events (80-day pullback and release) were in extremely close proximity in the case of the +20% and +25% YTD levels.

I didn't include the +15% YTD level, because I don't pay much attention to +15% YTD in my own analysis. But I did show a Fibonacci +31.8% YTD level, though I have only recently started looking at such a YTD level as having potential significance, driven mostly by the fact that so many stocks are now above +25% YTD (and I've never attached much significance to such levels as +30% and +33%). And I thought it was also a little bit cool that the most recent IWM peak came in around this +31.8% level, and was followed by a pullback of almost 5%.

Daily Chart of iShares Russell 2000 Index (IWM) Since January 2013

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