We've already had some great trades come out of this small cap-focused column since we launched it late last year and started rotating it with our flagship bottoms-up scan, "Under The Hood."
To make the cut for our Minor Leagues list, a company must have a market cap between $1 and $2B. There are also price and liquidity filters. Then, we simply sort by proximity to new highs in order to focus on the best players only.
The goal is to catch the strongest names while they’re small and still have serious upside potential. If any of these stocks ever climb the ranks to the big leagues, the returns could be huge. We’re looking at 5-10x moves just to break into large-cap land!
Let’s dive into this week’s report and see what’s happening in some of the hottest stocks in the Minor Leagues.
Despite the primary trend being higher, small caps have been a sideways mess for more than 3 months now. Check out this continuation pattern in the Russell 2000 $IWM:
Until we get a resolution, there is no directional bias at the index level for the foreseeable future. As long as this is the case, we want to pick our spots selectively and not press longs as we had been up until a few months ago.
Regardless of the market environment, there will always be winners (and losers) coming out of this universe. But when we go through a corrective phase as we have for much of this year, it can give us valuable insight as to which stocks are likely to be leaders once the storm passes.
So we embrace times like these and use them to prepare for when the market inevitably begins trending again.
Remember, just because we outline certain levels for our trade ideas, it doesn’t mean the trades will be put on tomorrow. Consolidations and corrections can take time, and these trades can take weeks… even months, to trigger an entry. So, set your alerts and be ready. But remain disciplined, and don't jump the gun in the meantime.
Patience and cash continue to be good positions. There is no reason to force anything during these periods when the market is NOT trending. There will be plenty more opportunities in the future.
Now let's take a look at this week's top players which have been bucking the trend amid the lackluster price action from small caps more broadly:
Since we sort our list by proximity to all-time highs, the names above are all potential future leaders as they are not only exhibiting impressive relative strength but also continue to make new highs on an absolute basis.
With that as our backdrop, let's take the field and highlight this week's top plays!
Batter up...
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