IWM Day chart is testing the waters of a harmonic pattern completion as shown with the red zone, this particular pattern called a Bearish Butterfly.  A name for a completion zone is PRZ (Potential Reversal Zone) and the rules are that once price is inside a PRZ, it’s in decision mode and it depends on where price can break and hold outside of the PRZ to offer an initial directional bias.

This chart does have upside bias as long as can hold above 129.13 but more important if price can hold aove 133.21 the top of the PRZ is an ideal target because in the world of harmonics, PRZ’s encourage price to test all of the levels in that respective zone.

If one is already in a long position that means that 138.88 is a region to take some profit, protect position or prepare to exit.  If one is not in a position, the top of the PRZ offers an opportunity for a reversal, of course dependant on price action, with the risk defined.

I learned the hard way that my bias has its limitations so good risk management includes being prepared for all scenarios.  So below 129.13 is my risk defining moment because below there shifts the bias strength of upside to netural or downside, increasing in that scenario below 125.05.

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