Watch These Key Russell 2000 Levels Amid Rotation Into Small Cap Stocks

The Russell 2000 jumped 3.6% on Thursday to significantly outperform the S&P 500 and Nasdaq Composite as investors rotated from mega-cap tech stocks into smaller companies perceived to get a bigger boost from Federal Reserve rate cuts, which now look more likely after June’s inflation report showed an unexpected fall in consumer prices last month.

Below, we take a closer look at the Russell 2000 chart and use technical analysis to identify important levels to watch out for.

Breakout From Symmetrical Triangle

Over the past four months, the index has oscillated within a symmetrical triangle, but staged a decisive breakout above the pattern’s top trendline on Thursday, potentially paving the way for the start of a new trend higher.

What Are The Upside Targets?

Shorter-Term Target

To forecast a shorter-term price target, we can use the measuring principle, To do this, we calculate the distance of the symmetrical triangle in points near its widest point and add that figure to the pattern’s top trendline. In this case, we add 215 to 2,080, which projects a target of 2,295.

Longer-Term Target

We can predict a longer-term price target by taking a bars pattern from the index’s trending move between October 2023 to March this year and overlay it on the chart from the April swing low. This indicates a potential move up to around 2,500. The index would likely encounter significant resistance near this level as it also sits less than 2% above the Russell’s record high at 2,459 set in November 2021.

The index finished at 2,125 on Thursday, its highest closing level since January 2022.

Watch This Key Support Level

Investors looking at lower entry points should monitor the 2,080 level, an area on the chart likely to find support during retracements from the symmetrical triangle’s upper trendline, especially if other indicators, such as the relative strength index (RSI) or stochastic oscillator, are simultaneously pointing to oversold conditions in the index.

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As of the date this article was written, the author does not own any of the above securities.