The Russell 2000 Index (RUT) rallied 2.8% on Tuesday to close the day at 716.82. It was the fourth gain in the last five trading days. Over the span RUT gained 8.2%, resulting in a 'very large'* five day gain. History suggests the bullishness will resume.
* Five-day percentage gain is more than two standard deviations stronger than the average five-day percentage change measured over the last 30 trading days.
Q: How has RUT performed in the past when it rallies by more than 0.5% to record a 'very large' five day gain on Tuesday?
A: According to the 19 previous occurrences of this event, EventEdge indicates that RUT has shown a strong bullish edge that peaks eight trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Tuesday, July 22, 2008) is Friday, August 1, 2008.
RUT rallies in 100% of the cases (19 of 19) by an average of 2.9% relative to the close on the event date, which, based on the close of RUT on the event date (716.82), provides a target price of 737.61.
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Ronish Patel is an analyst with MarketHistory.com.