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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More Top Calls From Mike
In his September 30th chart analysis for MPTrader members, Mike Paulenoff wrote bullishly about AMD, noting:
"AMD has piqued my interest technically because all of the price action off of its ATH at 122.38 (8/04) into the September lows at 99.51 (9/20) and 99.81 (9/29) has the right look of a complete, or nearly-completed correction of the prior major advance off of the 5/13 low at 72.50. As long as the 99.
MRNA's August downside reversal from a new all-time high (ATH) at 498.60 (8/10/21) to 349.00 (8/16/21) was just the first shot over the bow of a larger-developing corrective pattern and period.
Thus warned Mike Paulenoff to our members on the afternoon of August 16th, when, with MRNA trading at 363.
This past Monday, with Nike (NKE) poised to report earnings later in the week, Mike Paulenoff told MPTrader members that "NKE is vulnerable to a press into the 140-143 target zone either ahead of, or in reaction to, the earnings news."
NKE was trading at 161.75 at the time, and by the week's end the stock was 149.59, having hit a low of 148.
Back on August 18th, nearly two weeks ahead of ZM's (Zoom Video Communications) earnings report, Mike Paulenoff cautioned MPTrader members about the stock.
Mike wrote: "The price structure, which has pressed relentlessly lower (15%) since its 8/05 rally high at 404.35, is probing -- and trading below -- its 100 DMA, now at 345.67, and is considerably beneath its 200 DMA, now down-sloping at 367.20.
In our Top Call article a month ago, we told you about how Mike Paulenoff called AAPL's upside continuation, with the expectation that the stock could extend a little higher before upside exhaustion.
AAPL, indeed, went on to stair-step higher to reach a high of 157.26 high last week, overshooting the upper boundary of Mike's 153-156 projected high-zone by just 0.8%. It then proceeded to initiate the expected bout of weakness that accelerated to the downside this past Friday.
