IWM - 2025 is likely to be tough. For the large part of the year IWM is likely to face strong headwinds
Technical Analysis: Elliott Wave | IWM CMP: 242 | Dt - 1st Dec'24
Simple Speak
IWM formed a multi-year top in 2021 and has been in a corrective pattern since then. It is not entirely clear whether this corrective pattern has ended or is still playing out.
2025 is likely to be a challenging year for IWM. If the corrective pattern is still ongoing, 2025 could bring a significant drop in IWM. If the corrective pattern has ended, the immediate short-term price should move higher but is expected to begin a corrective wave in Q1 2025. (Chart #1 & #2)
Primary Count: The ABC corrective pattern is still playing out. The current price rise is a Wave B retracement, which can advance to a maximum of 267. If our primary count is correct, the price should retrace significantly in a Wave C drop, represented by the Green box in Chart #1.
If the price moves above 267, we will need to adopt our alternate count as the primary count.
Alternate Count: The ABC pattern ended in October 2023. A new impulse pattern began then and is currently underway.
However, given the choppy price action in the current move (see Chart #3), it does not resemble an impulse wave, which is why this count remains our alternate count.
Even if this count is correct, a Wave 2 retracement is likely to start soon, suggesting that IWM could move lower for most of 2025.
AlgoChirp’s EW Analysis: For 2025, IWM shows massive downside potential (25–50% drop) with relatively limited upside potential (~10% rise) at current levels.
Chart Speak #1 - Long Term
Primary wave count - Option 2 below
Alternate wave count - Option 1 below
Chart Speak #2 - Primary Count
Chart Speak #3 - Alternate Count
Previous Update - 15h Oct’24
Technical Analysis: Elliott Wave | IWM CMP: 223 | Dt - 15th Oct'24
Tl;dr - IWM has one of the cleanest charts adhering to various EW guidelines. And it is suggesting that a massive Wave C decline lies ahead. This outlook is not for short term, but given how far Wave B has retraced, the start of the decline is not years but merely weeks/months away. Regardless, 2025 will likely be a tumultuous year for Small cap stocks
Simple speak
Analysts seem to think it is a good time to buy IWM, with a Buy or Strong Buy rating.
AlgoChirp’s EW analysis suggests IWM has a massive downside potential (30-50% drop) and very little upside potential (5-7% rise) at these levels.
Chart #1 - Decades long pattern unfolding
TA speak - Elliott Wave analysis by AlgoChirp
From its inception, IWM has followed Elliott Wave guidelines to the T. Price high that was made in 2021 can be labelled as a Wave 5 top with high confidence given what has transpired since then, corrective wave pattern (A-B-C).
It seems this corrective pattern is now nearing the end of Wave B. If this count is correct then the next leg down will be a swift one in Wave C.
Red box in Chart #2 below is the length IWM price will likely traverse. It can always be lesser in magnitude but a 30%-50% drop is likely on the cards. It is important to note that this Wave will take its own time to play out with various ups and downs.
Alternate count (Chart #2) - Incase the current perceived Wave B breaks through above the red lines in Chart #2, then the current count described above would invalidate and we will need to reassess the situation. However, at this point, this alternate count is of low probability.
Chart #2 - 2025 will bring trouble for smallcaps
Analyst Rating vs EW count
Analyst rating suggests bullish outlook for IWM on a Monthly timeframe. EW projection however is for the price to make significant lows
Analyst rating is “not In sync” with EW count
