Capitalizing on IWM Deterioration
by Mike Paulenoff
May 16, 2014 • 12:00 AM EDT
On Wednesday afternoon, May 14, we added the IWM August 110 Puts at 4.20 to protect long exposure through the summer months. The underlying IWM (Russell 2000 Small Cap ETF) was trading at 110.55 at the time of entry. The very next day, on Thursday morning, the IWM traded down to a low of 107.44, causing the August 110 Put to appreciate to 5.75-5.90.
We noted on the chart on Wednesday (see below) that the IWM "has carved out a significant multi-month top formation, and is biding time ahead of a very ugly breakdown beneath 110-108 that will unleash a waterfall of selling pressure that projects to 95.00-93.00. With the 50-day EMA (113.16) bearing down on the price structure AND the flattening 200-day EMA, the IWM looks particularly vulnerable to serious weakness in the days and weeks directly ahead."
MPTrader is in an excellent position to take advantage of further near- and medium-term deterioration in the Russell Small Cap ETF (IWM).
Mike Paulenoff is the author of MPTrader.com, a real-time diary of his technical analysis & trade alerts on
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