While the Big Tech names have been stealing the headlines, something interesting just happened in the small cap space that caught my attention.
The Russell 2000 Index (RUT) recently dipped down to its daily Market Roadmap line, and what we saw was a bullish backtest of the breakout. This is exactly the kind of setup I look for — it tested the Roadmap line, tested the breakout from the highs back in the previous move, and then bounced.
Now, I’m not saying this is a guaranteed winner — nothing ever is. But if the momentum remains strong enough, we’re set to make the next leg higher with a target of 3,100.
This is game on.
Now, I’m not saying this setup is perfect. But if buyers keep stepping in, the path higher is wide open.
The Line in the Sand
Here’s the thing about this setup — it comes with a very clear risk parameter, which is exactly what I want to see.
If we break down from here, it’s probably all she wrote for this move higher. The level at 2,737 is probably going to stand as the high we hit recently. That gives us a clean invalidation point for the trade.
I know what you’re thinking — RUT is an index not everyone trades directly. Fair point. But there’s a much more accessible way to play this move.
How to Actually Trade This Setup
The ETF you would want to use here is the iShares Russell 2000 ETF (IWM). From current levels, we’re looking at roughly 20% upside on the Russell 2000, which translates nicely to IWM.
Yes, it pulled back a little after the initial bounce, but that’s normal price action — it does not invalidate the setup.
The key is understanding what we’re working with here. This was a textbook bullish backtest of the breakout — the kind of pattern that tends to resolve in the direction of the primary trend when it holds support.
Small caps do not always follow the same path as their large cap cousins, and right now they’re showing us something worth paying attention to. The setup is there, the levels are clear, and the risk is defined. That’s about as good as it gets in this market.
Jeffry Turnmire
Jeffry Turnmire Trading
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I’m just a regular dude in Knoxville, Tennessee: a husband, father, civil engineer, urban farmer, maker and trader.
I’ve been at this trading thing with real money for 20-plus years, and started paper trading over 35 years ago. I have a knack for making some epic predictions that just may very well come true. Why share them? Because I like helping other people — it’s the Eagle Scout in me.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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