RDW Triggers at a Key Cycle Low

 

Above is a daily chart of RDW with its 52-day cycle plotted, a cycle I talked about just a few days ago. Coming into today, RDW was in the time window where I expected a cyclical low to form. That alone doesn’t mean you blindly buy, but it does mean I’m paying very close attention to price behavior. Today, I finally got what I was looking for, a trigger.

When I’m trading cycles, timing is only half the equation. The other half is confirmation from price. A cycle can say “a low should be forming,” but price still has to agree. In RDW’s case, price stepped up right where it needed to. If this cycle plays out the way it has in the past, the expectation is that RDW should begin trending higher over the coming days and weeks. I’m not calling a straight line move, but I am looking for higher highs and higher lows as the cycle turns up.

Risk management is always front and center for me, and this trade is no different. My protective stop would be placed a few ticks below yesterday’s low. That level makes sense structurally and keeps the risk clearly defined. If I’m wrong, I want to know quickly and get out with minimal damage. One of the biggest advantages of trading cyclical lows is that you can often define risk very tightly while still having meaningful upside if the trade works.

In the next chart, I zoomed in on the daily timeframe to better highlight the area where price held. What stands out immediately is the confluence of support. RDW held a significant support zone that includes the .618 Fibonacci retracement as well as prior highs from earlier in the move. Former resistance turning into support is something I always pay attention to, and when that lines up with a key Fibonacci level, it adds weight to the level.

This is where things start to get interesting. When you combine clear price support with an expected time window for a cyclical low, you get what I consider a high-probability setup. That doesn’t mean it’s guaranteed, nothing ever is but it does mean the odds are stacked in my favor. These are the types of trades I want to take again and again over time.

For now, the work is done. I’ve identified the cycle, waited for price confirmation, defined my risk, and taken the trigger. The next step is patience. Now we let the market do what it’s going to do. Let’s see what next week brings.

For more analysis and market insights, visit my homepage