Many Small-caps have been leaders from the very beginning of this bull market.
Even through the first couple of weeks of 2024, which haven't been great, Small-cap Industrials are still up over 42% since the Summer '22 lows. Small-cap Consumer Discretionary is up over 37%.
Both of these have outperformed even the S&P500 during this period.
So maybe the "Russell2000" has underperformed. But that doesn't mean that "Small-caps" have underperformed.
It's on a case by case basis.
Here is a list of our Minor Leaguers, for example, which include the strongest stocks between $1 Billion - $4 Billion in market cap:
One of the areas I’ve identified where I can improve my trading is in trade selection. Specifically, my trade avoidance.
Due to my early trading experience as a stock trader, it was ingrained in me during my formative trading years to avoid positioning in stocks that are about to announce earnings.
And for good reason.
Once a stock trade is on, our only real defense against punishing losses is to have a stop-loss order working. That’s fine if you trust yourself to always honor your mental stops. But for most of us mere mortals, the good-til-canceled stop-loss order is our best protection.
99% of the time, a stop-loss order works as intended. Sure, we might suffer a little slippage here and there. But it works like a charm in preventing disaster. Especially for intraday trades.
But for overnight holds, a stop-loss order has its limits. And these limits are fully exposed in the event of a binary news release – most notably earnings announcements.
We've had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
We expanded our universe to include some mid-caps.
To make the cut for our Minor Leaguers list now, a company must have a market cap between $1 and $4B.
From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @Alfcharts
This is one of our favorite bottom-up scans: Follow the Flow.
In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish, but not both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients.
Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
Let's remember that throughout the 4th quarter we were going out of our way to be more aggressive than even we were accustomed to.
It was a different environment.
And while we did not know what 2024 would bring, we still don't, at least we came in with a good list of developments that would likely be occurring before a more severe correction was underway.
Remember, the new highs list peaked on December 14th. So that means we're over a month into a market correction that you can only see taking place underneath the surface if you bother to look.
Here's how each of the sectors have performed during this correction:
These are the registration details for our LIVE Mid-month Conference Call for Premium Members of All Star Charts.
Our Live Call will be held on Thursday January 18th @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
