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Earlier this week, I revealed one chart that’s on my radar and one that I believe all traders should have on their radar.

It’s the iShares Russell 2000 ETF (IWM) relative to the Invesco QQQ Trust (QQQ).

 

 

This chart is pretty close to 2000 levels.

If you don’t know what happened that year, well you might get caught in the market.

While everyone and their brother are looking to buy and random stocks in the QQQ to buy, I’m going to remain selective with my plays.

You see, if history repeats itself…

We might see some action like this chart below.

 

 

The QQQ (the black line) entered into bear market territory, while IWM was relatively strong between May 2000 – May 2002.

That being said, I’ve got my eyes set on two stocks I believe can make a move very soon… regardless of what the QQQ or IWM does.

 

What The Data Tells Me About These Two Stocks

 

First up, American Superconductor Corp (AMSC) is on my watch.

  • This global renewable energy company offers electric control systems, generators, power converters, and more
  • AMSC has been underperforming its peers in the past 52 weeks (64% gain vs 224% gain). For the company with the market cap of around $300M, this means there is room for the stock to catch up
  • Analyst consensus is Buy with an average target of $15
  • The stock just set new 52 week highs and is on track to break all-time highs.
    With the float of 19M shares and 11.3% short interest, this stock has the potential for an explosive move higher
  • I would be looking to buy this on dips with the stop at $12

 

 

The stock broke above some key levels, and I think it can get to recent highs… and if momentum builds, I wouldn’t be surprised if AMSC can get to $20.

Next up, Rackspace Technology (RXT) is on my radar.AMSC

I know what you’re thinking… RXT is a tech stock, I thought you were looking for other areas of opportunity.

Well, from a data standpoint, RXT looks as if it’s about to run higher.

Rackspace Technology (RXT):

  • RXT is a relatively small company with a global presence in the IT services sector.It provides colocation, managed cloud and hosting, enterprise security, and data protection services with a market cap of about $3B.
  • The company priced its IPO in early August at $21 and opened for trading at $16.85. The current float is 33.5M and short interest is 14.4%
  • The stock is currently trading in a tight range around $18.
  • I believe that this is a great risk-reward opportunity. I would buy it with the stop at $16 and expect this to at least retest its all-time highs of $22.75.

 

 

With the stock holding around a key Fibonacci retracement level, it’s an indication there’s demand for the stock, and it can make a move very soon.

If the stock manages to get above $22.75, we could see $30 not too long after.

There are plenty of opportunities out there, and now, more than ever, I believe it’s crucial to understand price action because it can help to pinpoint the ones set to pop off.

Author: JC Parets

 

I want you to take a look at this heat map of the S&P 500 over the past month.

 

 

The data paints a picture of sector rotation, and if you’re not picking up on the trends going on right now…

You’ll probably get behind.

You see, everyone has been conditioned to just buy the dip in tech stocks. However, what happens if that trend breaks?

Well, it might be too late to start to rotate into other sectors because you’ll just be chasing FOMO at that point.

I want to show you which patterns I see developing, and what I believe all traders should pay attention to right now.

 

Where I See Opportunities In The Market Right Now

 

I want you to take a look at the IWM:QQQ again.

 

 

This is the ratio of IWM:QQQ, and it shows the outperformance of the small-caps in relation to tech stocks back during the tech bubble.

Right now, the IMW:QQQ is reaching those levels back in 2000.

There may be a bucking of the trend, and small-caps may outperform very soon.

So where would I look now?

Well, some small-caps that look interesting to me are Bloom Energy (BE), Blink Charging (BLNK) and Franchise Group (FRG) as potential longs.

Another trend I’ve noticed is the rotation into some “boring” sectors.

The S&P Chemicals Index ($CEX) just broke out of its highs dating back to 2018.$CEX

 

 

I don’t know about you, but that chart screams to look at the laggards and potential plays in chemicals stocks.

Of course, when I think of the S&P Chemicals Index, I automatically think of the Materials Select Sector SPDR Fund (XLB) to see if there are any other potential plays.

Well, what do you know…

 

 

XLB is also breaking out from those levels.

With XLB, I’m bullish if it can stay above $62, and my target is around $78.

Linde PLC (LIN) is another materials stock on my radar.

 

 

If it can break and stay above $244, I think it can break away from its highs and head to the $304 level.

Right now, it’s of the utmost importance to pay attention to the price action and uncover “new” trends in the market.

While tech has taken a pullback, traders have been missing out on the potential rip-your-face-off rallies in areas outside of tech.

I’ll make sure to keep you posted if I uncover any new trends or interesting charts.

Author: JC Parets

For years, traders have complained about how large-cap tech stocks were the leaders in the market and how there were some sectors and industries that don’t get any love.

I mean some traders and investors have only recently started to get heavy in tech stocks (Warren Buffett comes to mind).

However, those who just started to get heavy tech stocks may be in for a rude awakening.

The data tells me these traders and investors will have something new to complain about — the popping of the tech bubble.

Listen, I’m not just calling for a bubble first for no reason…

There’s actually data that backs up my statement, and I want to show you what new trend I’ve noticed and the one chart I believe every trader needs to focus on.

 

It’s Happening… Again!

 

The last time the Russell 2000 Small-cap Index was at these levels relative to the Large-cap Nasdaq 100 Index, Small-cap stocks went on a historic run, particularly relative to those large-caps.

It started exactly 20 years ago, from the exact price we’re at today.

Here’s what that looks like:

 

 

The Russell 2000 Small-cap ETF (IWM) was launched in May of 2000. The chart above shows the historic run of outperformance that small-caps saw starting shortly after that. It’s rare for that sort of thing to happen. Usually it’s the opposite.

Right now, this chart signals to me the Nasdaq may start to pull back, and small-caps might outperform.

 

 

The QQQ (the black line) entered into bear market territory, while IWM was relatively strong between May 2000 – May 2002.

Based on the first chart above, if Small-caps are ever going to start to outperform the monsters in the Nasdaq 100 again, this would be a perfectly logical time for that to start. And so far, that’s exactly what we’ve seen throughout September.

That’s what we’ve so far in September.

Seems like everyone is always complaining about how these mega-cap Nasdaq 100 stocks are too big and control the market.

What are they going to complain about next? That they’re underperforming and dragging down the indexes?

I think yes.

What’s the solution?

Find small and mid-cap stocks making new highs and driving these higher, particularly relative to the Nasdaq.

What about sectors? 

I think sectors with smaller weighting in the index will continue to outperform both the major indexes and those nasdaq-type sectors.

What does it mean for large-cap index investing?

I think it could have a really tough time moving forward.

I prefer individual securities and/or specific sector ETFs all day long for the environment I believe we’ve just entered into.

So you still like buying stocks?

Yup. Just very specific ones.

Author: JC Parets

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