Can't Hide Accumulation

JC Parets
October 11, 2022

You know me by now, I prefer to look underneath the surface to see what's actually happening in the markets every day.

The headline number of, "What did the Dow do today" doesn't tell the full story.

I'm more interested in the performance of the individual sectors. Which types of stocks are leading and which ones are lagging?

When it comes to accumulation by institutions, it's easy for them to buy as much of the mega-caps as they want.

It's hard to leave your footprints with such massive market caps and liquidity levels.

In Small-caps, however, it's hard NOT to leave your footprints, especially for the largest financial institutions.

With such tiny market-caps, there are only so many shares to go around.

If the larger institutions want a meaningful position in a smaller-cap stock, it's nearly impossible to hide what they're doing.

Plus, this accumulation becomes even more clear when the rest of the market is under pressure.

Our Minor Leaguers Report does a great job of identifying the relative strength in Small-caps, which to me is the perfect scan for this type of market.

Here's what this week's list looks like:

These are stocks with a market-cap of only $1-4 Billion. Since they're sorted by relative strength, the strongest rise to the top.

Remember, this is a market of stocks, and not just a "stock market".

"If you trade the averages, you'll get average returns", is how I learned it from a wise Egyptian man many years ago.

So I think, in this market especially, keeping an eye on small-caps that just can't sell off is probably a good place to look.

Premium Members can access our entire Minor Leaguers Report here.

But take a look at the relative strength out of this Communications Equipment stock Digi International, for example.

While the Small-cap Russell2000 is hanging out near 52-week lows, $DGII has been going parabolic on a relative basis.

There is accumulation taking place:

And when you look at the stock itself, notice how this one doesn't look at all like the Russell2000 Small-cap Index.

It doesn't look like any index, really.

In fact, it doesn't look like many stocks either.

It's in a world of its own.

And you know why?

Because accumulation in a $1.25 Billion stock is impossible to hide. These are the institutional footsteps:

So what are you doing about it?

Any other names that stand out to you?

This week's full Minor Leaguers Report is available here for ASC Premium Members. And the details of our trade ideas are listed here.

BTW if you don't have our NEW Rangefinder App yet, this is by far the best way to organize our trade ideas - both longs and short.

Email me if you still don't have Rangefinder.

Or call Mary: +1 (323) 421-7910 and she'll get you set up.

- JC

 

Filed Under