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.
The goal is to catch the strongest names while they’re small and still have serious upside potential. If any of these stocks ever climbs 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.
While the primary uptrend is still intact for small caps, we've gone absolutely nowhere since Q1, as the Russell 2000 $IWM remains a sideways mess over the intermediate-term.
Here's a look at the current continuation pattern with price trading right in the middle of its range:
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 force longs.
This is even more true when we consider that SMIDs have been the laggards for almost all of 2021.
Though regardless of the market environment, winners will always come out of this universe. And when we go through a corrective phase, as we have for much of this year, it can give us valuable insight into which stocks are likely to be leadersonce the selling pressure alleviates.
For this reason, we embrace times like these and use them to prepare for when the market inevitably begins trending again.
Let’s take a look at this week’s top players, which have been bucking the trend through this volatile environment:
Since we sort our list by proximity to all-time highs, the names toward the top are potential future leaders. They're not only exhibiting impressive relative strength, but they also continue to make new highs on an absolute basis.
In recent months, we've seen more and more stocks from defensive sectors creep onto our scans. More recently, we're starting to see more cyclical names pop up on these lists, which makes sense considering the strength we're seeing from these groups right now.
As such, we only have one setup today, and it's from the Industrials sector. Remember, patience and discipline continues to pay.
With that as our backdrop, let’s take the field and highlight this week’s spotlight performer!
Batter up…
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