IWM Trade on Dec 30, 2021 10:21 from JRockTrades: Tradervue User Stock Trades.

Big Picture:

While the overall market has been ripping for the last year, IWM small caps have remained in a longterm consolidation during that period. There was a false breakout about a month ago that ended up pulling back into the consolidation and all the way to support. Since then it has remained inside it's trading range.

Technical Setup

IWM was very strong off the open. It had all the characteristics of a stock that could trend on the day and close near the high. It had already ran from 222.5 to over 225 before it came to my attention. My go to method for entering such a stock is to try to take a long position as deeply into a pullback as possible. If that coincides with VWAP or an important technical level, than it is an even better risk to reward entry.

I took a position right at VWAP as IWM was coming in, with a stop jut below VWAP at 224.40. My stop almost got wicked out twice, but managed to hold. When you manage to get this tight of risk, the reward can be small and still be 5 to 1 or better. I started to take off some of the position to cover risk as IWM made a move over 225.

My intention was for this trade was that if IWM was going to trend on the day, then I would take off shares into strength and add into retracements to VWAP. I wanted to have probably like 15-30% of my position left at the end of the day for an overnight swing. Unfortunately none of this ever materialized.

I never moved my stop and ultimately, IWM did not have the strength on this day to hold over 225 and move higher. I got stopped out on half the position for a very modest overall win.

Conclusions

For the overall weakness that IWM has shown relative to the rest of the market, I should not be surprised with the result of this trade and IWM closing at the low of day rather than high. It just isn't ready to move up yet. One of these days this trade is going to work.

I should have been bigger in this trade. With only fifteen cents of risk I could have easily taken 300 shares no problem. This is something like a B+ setup for me in that even when it doesn't work super well, as in this instance, you can usually still get out okay.