The Small Cap Index Gained 3.6% on Thursday as S&P 500 and Nasdaq Composite Tumbled
The Russell 2000 jumped 3.6% on Thursday as investors rotated from mega-cap tech stocks into smaller companies perceived to get a bigger boost from potential Federal Reserve rate cuts. The index broke out from a symmetrical triangle on Thursday, paving the way for the start of a new trend higher. The measuring principle projects a shorter-term target of 2,295. A bars pattern predicts a longer-term target around 2,500. During retracements, the index could retest the symmetrical triangle’s top trendline near 2,080.
Breakout From Symmetrical Triangle
Over the past four months, the index has oscillated within a symmetrical triangle but staged a decisive breakout above the pattern’s top trendline on Thursday, potentially paving the way for the start of a new trend higher.
What Are The Upside Targets?
Shorter-Term Target
To forecast a shorter-term price target, we can use the measuring principle. To do this, we calculate the distance of the symmetrical triangle in points near its widest point and add that figure to the pattern’s top trendline. In this case, we add 215 to 2,080, which projects a target of 2,295.
Longer-Term Target
We can predict a longer-term price target by taking a bars pattern from the index’s trending move between October 2023 to March this year and overlay it on the chart from the April swing low. This indicates a potential move up to around 2,500. The index would likely encounter significant resistance near this level as it also sits less than 2% above the Russell’s record high at 2,459 set in November 2021. The index finished at 2,125 on Thursday, its highest closing level since January 2022.
Watch This Key Support Level
Investors looking at lower entry points should monitor the 2,080 level, an area on the chart likely to find support during retracements from the symmetrical triangle’s upper trendline, especially if other indicators, such as the relative strength index (RSI) or stochastic oscillator, are simultaneously pointing to oversold conditions in the index.
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In conclusion, the recent performance of the Russell 2000 index highlights the shifting investor sentiment towards small-cap stocks amid expectations of Federal Reserve rate cuts. The breakout from the symmetrical triangle pattern suggests a potential uptrend with short-term and long-term price targets identified. Investors should keep a close eye on key support levels for potential entry points as the index continues its upward trajectory.
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