Trade of the Day: iShares Russell 2000 (IWM)

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The Fed minutes release provided a little afternoon drama on Wednesday, with the tight trading ranges holding and tech and the small-caps showing strength afterwards. The slight pullback in the overall market wasn’t much of a threat, as fresh support continued to hold.

The Dow fell 27 points, or 0.15%, to settle at 18,285. The blue-chips traded to a high of 18,350 shortly after the Fed minutes but struggled with resistance at 18,350. The rest of the day was weak, though support at 18,200 held for the fourth-straight session. Meanwhile, the S&P 500 slipped 2 points, or 0.1%, to close at 2,125. The rebound to 2,134 intraday cleared Tuesday’s all-time high of 2,133.

The Nasdaq gained 2 points, or 0.03%, to finish at 5,071. The bears were aggressive on the open and managed to push support at 5,050. This level stuck like Chuck as the bulls rebounded to reach a peak of 5,097. Resistance at 5,075–5,100 continues to be troublesome, but a close above the latter would be bullish. Backup support is at 5,025–5,000 on a close below 5,050.

The Russell 2000 climbed 2 points, or 0.2%, to end at 1,257. The small-caps tested a high of 1,257 and a low of 1,252 within the first 30 minutes of trading. The rest of the day was range-bound before a burst past resistance at 1,260 on the Fed minutes. A close above this level would be bullish for a possible test to 1,270-1,275. Support is at 1,250-1,245.

The spike above 1,260 on the small-caps was encouraging, which is why today I am recommending call options on the iShares Russell 2000 Index (ETF) (IWM):

Buy to open the IWM June 128 calls (IWM150619C00128000) at current levels, around $0.70. Set limit orders to close the first half of the trade at $1.05 and the second half at $1.40. These are the regular monthly options that expire on June 19.

I would like to close the first half of the trade into strength by Friday’s close, ahead of a three-day weekend. Resistance is at $126–$127. A close above the latter could lead to short-covering to $128–$130. Support is at $125–$124.50.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/05/trade-of-the-day-ishares-russell-2000-iwm-2/.

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