Russell 2000 Possible Short

The chart above is a 4 hour chart, saved on 4/12/21 at 1:30pm ET. It's a busy chart so try to look at just the aspect that is being discussed.

First notice the big, thick, white, diagonal lines. These form a possible AB/CD pattern. The D point for an AB=CD 1:1 ratio can be calculated by 2306.40 - (2366.00 - 2092.70) = 2033.10 (I'm aware the trailing 0's after the decimal are superfluous. They're included for clarity when looking for those numbers on the chart). 

Notice the D point coincides with the 161.8% Fibonacci Extension of both the yellow range (2045.30) and the purple range (2042.80). These levels are also on the way down to the 27.2% Fib Extension of the green range (2018.26).

So far, we've identified a good 1st target area. We'll set the target to just above the highest point of resistance we've found, at 2046.

At the current time, price is just drifting sideways. This sideways movement has created a BB/KC Squeeze. Notice the Bollinger Bands are inside the Keltner Channel. This is not a confident place to enter a short trade. We want some kind of confirmation we're going to break to the downside rather than the upside. So, we'll enter when price has made a new swing low. The most recent swing low has been at 2206.70. We'll enter a Sell Stop order at 2206.

If our short is triggered, and we reach our target, then we'll have breached the large Head & Shoulders pattern. The pattern is indicated with a thick, white, vertical line, and the thick, white, slightly angled Neckline at the armpits. If we breach the Neckline, then we'll copy and move the vertical line such that the top of the line is on the Neckline at the break out point. This is the traditional measured move for a Head & Shoulders pattern. You can easily see the measured move will have an expected target for the H&S breakout far below our 1st target. 

So, if we hit our 1st target, then we'll wait for price to bounce back up and retest the H&S Neckline, and start back down. When we see that, it would be a good time to re-enter this short position with a lower target. But we have a long way to go before we need to worry about that trade.

Summary:

4/12/21 4 Hr (M2K $5/pt)

Entry: Sell Stop 2206

Stop: 2254

Target: 2046

Risk: 2206-2254=48*$5=$240

Reward: 2206-2046=160*$5=$800

R:R=3.3:1