Daily Market News - 2nd Nov 2021
Are The Small Caps Ready To Rip?
Over the last few weeks, I’ve been putting out a lot of actionable charts, and most of them have played out pretty well, and in todays letter I want to draw your attention to the small caps.
The Russell 2000 over the last 9 months has been 1 big giant mess. Chopping sideways. Individual names up 5% 1 day, down 7% the next… there’s been no real reason to get in unless you’re sharp enough to pick up tradeable bottoms, but in the coming days that could be about to change.
Russell 2000 (IWM)
Look at the chart, it’s been consolidating nicely and we all know the saying… the bigger the base, the higher in space?
Well, with the S&P500, Tech, Midcaps and the Dow already breaking out, it makes sense to me that the Russell 2000 joins the break out party sooner rather than later and after yesterday relative performance, it probably lends itself to more of a bullish thesis than a bearish 1.
You’re looking from stocks in the $300m to $2B Market Cap Range that are looking ready to move. We’re not looking for down trends around here. That’s just silly.
For those of you who like to worry about things like money printing and covid, it pays to understand that the stock market is not the economy, nor is it a reflection of public health.
Let me show you how I use the major averages.
Some of you will have picked up my recent analysis on the 20th October FOUND HERE where I was highlighting the imminent break out for the market, so what do I do… I go find the best stocks in the best sectors, which are offering the best risk:reward propositions where risk can easily be defined and I present charts like Plug Power (PLUG).
Provided to our members on the 21st October. It’s up 20% from its break out level. Many happy clients and members.
Or how about Digital Turbine Inc (APPS)
Solid Midcap name which put in a tradeable bottom on 21st September and hit our 40% upside objective yesterday.
In Summary
With the Small Caps it’s straight forward… we know they’re possibly about to break out, this screams risk on to me.
The level is clear $235. If we’re above $235, I don’t really see a bearish case to be made.
That said, if we break out and then put in a failed break out, that could be quite bad for the market… so it pays to keep an eye on pull backs and make sure they hold key levels. That’s also very important.
Small Caps are not for the faint hearted… they can swing wildly. So i prefer to define my risk and go get on with my day and don’t care to watch every tick of price, which is why Trend Following is so great.
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