Momentum Monday – The Rise of Small Caps

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The long-expected breakout in small caps finally happened. IWM cleared 160 and finished near the highs of its weekly range. There are few more bullish signs than small caps breaking out above a multi-month resistance and starting to outperform. 

Biotechs shined again and many accelerated their ascent. Don’t chase overextended biotechs. There are constant sector rotations in bull markets, so we are likely to see pullbacks in this sector as well. Sometimes the stocks that seem the most extended continue to vastly outperform due to a short squeeze or an acquisition rumor. This is why nimble intraday traders often focus on this type of stocks – super high short-term momentum coupled with big short interest.   

Quite a few software stocks continues to rise. SHOP had a beautiful big-volume breakout and it is now setting up near 340 for more. TEAM is consolidating between 125 and 130 with 130-131 being an important pivotal area. OKTA and MDB are in a range contraction mode and seem ready to bust higher.

Semiconductors tried to bounce but didn’t finish the week on a high note. Their destiny seems to be related to China and the U.S. support of the protests in Hong Kong wasn’t great news for both. Chinese stocks were a mixed bag last week. While many of the large-cap Internet stocks did really well – BABA, NTES, the overall Chinese market lost ground.

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