Wave 1 of 5 up is clearly a three wave structure. This is only possible if we are going to have a “diagonal”. That would imply that the structure is pretty well complete ( as opposed to the idea that just wave 3 of 5 is complete and there is still 4 and 5 to go ). Note that the RSI is right up there in overbought territory. This is it.
See previous blog on RUT. We are getting to the point where this thing should collapse, both as measured by time and value.
The stuff is still illegal in the US, at least on the federal level. Consequently they are coming North to do their IPOs. Here is a Canadian one that has been in business for a while. A first impression from the chart is that, here too, there might be a triangle which would suggest a new high. Another possibility is that the top has been in for some time and we have already completed an initial A down and a B retracement to about $40. If correct there is a rather dramatic drop straight ahead. Maybe you do not want to stick around to find out which of the two is correct.
As far as triangles go, the one featured in the Russell 2000 index is closer to perfection than any of the others. The three wave nature of each and every leg within the triangle is less ambiguous and more plausible and the proportions of the sizes of the legs are pretty well classical, that is approximately 62% of the alternating preceding leg.
Assuming this is correct, at least for this index even though any conclusions need not necessarily apply to others such as the DOW or S&P, then this pattern should terminate in less than a full month from now at least judging from the apex. A wild guess might be June the 20th. The triangle measures roughly 200 RUT points giving a target of about 1730.
Alternatively a diagonal may have started from the low of leg a, which then would be all of a 4th wave. Presently we would be in a minor wave 4 to be followed by wave 5 to complete the pattern. This could take a little longer but would not reach the same height as the upper trend line suggests a top at around 1640. This interpretation seems to be a bit far-fetched compared to the triangle proper.
Either way once completed these scenarios promise a sharp and violent reversal which you would not want to participate in. Particularly if the pink wedge actually applies, you might only have another 1 or 2 percent to go before you find yourself in the equivalent for stocks of Dante’s inferno.