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Oversold & Volatile IWM

 
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PostPosted: Sat Aug 04, 2007 6:26 am    Post subject: Oversold & Volatile IWM Reply with quote

Over a year ago, SPX was in its second longest bull market without a 9% or more correction. SPX fell from 1,556 to 1,433 recently, and closed at 1,433 Friday, which is a 7.9% pullback. A 9% correction is 1,415 and a 10% correction is 1,400. SPX may fall lower, perhaps in August. However, short-term, downside may be limited with elevated volatility. Large caps should outperform small caps. However, IWM is much more oversold, further below its 200-day MA, and more volatile than SPX or SPY. So, IWM may be a better trading stock. IWM fell 12% recently, from 85.20 to 74.96 (Friday's low). The three-year daily chart below shows IWM has fallen below its 200-day MA before. Also, the IWM low in March was 75.15, which is major support, and closed at 75.38 Friday. IWM resistance is around 77 1/2 short-term, i.e. middle of recent congestion area. It's currently at short-term support. Consequently, at this point, IWM calls, for example, may be better than SPY calls.

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