A couple of days ago I talked about a potential trade setting up in RDW, and today that setup finally triggered, so I wanted to give a quick update. As I mentioned at the time, I was watching RDW closely for a bounce due to the combination of the channel structure and a cyclical low that was coming due. When those two elements line up, I pay attention, because it often creates a favorable risk-to-reward opportunity.
Today the entry came on a clean break of the descending trendline, which triggered right around the 7.30 area. Once that level was cleared, price responded quickly, confirming that buyers were waiting for that signal. RDW went on to rally to an intraday high of 8.09, which was a solid first move and exactly what I wanted to see shortly after entry.
At this point, I’m expecting the rally to continue for at least a few more days. If momentum stays intact, it’s quite possible RDW works its way toward the top of the channel, which currently comes in around the 9.50 to 9.75 area. That zone would be a logical area for price to encounter resistance, and I’ll be watching closely if and when we get there.
Risk management remains key. My protective stop is set just below 6.80, a level that would invalidate the trade if price were to roll back over. Until then, the plan is to let the trade work and see how much upside the market is willing to give.
For now, the trade is doing what it’s supposed to do. We’ll see if RDW can continue to build on today’s strength as the days unfold.
If you missed it, I outlined the original RDW bounce setup in detail in my previous post
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