Small caps have led broader U.S. Equity indices to begin Q4, continuing their strong Q3 performance.
Small caps have led broader U.S. Equity indices to begin Q4, continuing their strong Q3 performance. The Russell 2000 Index (RUT) has gained over 1% (thru 10/16) while most other U.S. indices are flat to slightly negative. After reversing into Os on its default trend chart during Friday’s trading (10/10) and testing support at $2400, RUT reversed back into Xs during Monday’s (10/13) trading before giving a fourth consecutive buy signal and rallying to a new all-time high at 2540 intraday Wednesday (10/15). While most other equity indices either maintain buy signals and/or reversed back into Xs after Friday’s trading, RUT has led the charge this week, clawing back and improving upon recent highs.
Similar to the large cap space, technology has led recent upside action within small cap sectors with the Invesco S&P SmallCap Information Technology ETF (PSCT) gaining over 5% in Q4 so far. On the default trend chart, PSCT reversed back into Xs Tuesday (10/14) before giving a sixth buy signal at $56 during Wednesday’s trading (10/15), marking a new all-time chart high. The recent run has increased the fund score of PSCT above 4.5, roughly in line with the average score for a fund within the broader technology group (4.7), including large cap funds. Additionally, Wednesday’s breakout puts PSCT at the top of the 10-week trading band and in overbought territory, so those considering exposure to the fund will look for a pullback to the lower $50s before adding. Initial support lies at $52, while additional can be found at $47.50 and $46.
Given PSCT’s improvement and current overbought positioning, users may be looking for alternative ways to initiate small cap exposure. While there are a few underlying holdings of PSCT that are extended further into overbought and are not action at current prices – Cleanspark (CLSK) and SanDisk (SNDK) are examples – there are plenty of actionable names within the underlying. Utilizing the Security Screener, users can cull out actionable ideas with ETFs like PSCT being the underlying universe. Of the 70 holdings in PSCT, 31 currently maintain a technical attribute rating of 3 or higher, trade on a buy signal, and are in a positive trend. Below are two potential ideas that are holdings within PSCT and trade within an actionable range on the Weekly OBOS.
TTM Technologies Inc. (TTMI) – Electronics – TTMI is currently a 5 for 5’er and has maintained at least a 3 since May 2024. The stock has been in a positive trend on its trend chart since May of this year and a buy signal since early September. From a relative perspective, TTMI ranks within the top quintile of the Electronics sector matrix and maintains a long-term RS buy signal against the market, as defined by the S&P 500 Equal Weight Index (SPXEWI). TTMI kicked off Q4 by giving a third buy signal at $59 as shares rallied to a new chart high at $62. After reversing down into Os during last week’s trading, the stock reversed into Xs at $58 on Wednesday (10/15) before continuing back above $60 Thursday (10/16). TTMI is actionable in the $55 to lower $60 range. Initial support lies at $54, while additional can be found at $52 and $46.
Viasat (VSAT) – Telephone – VSAT is currently a 5 for 5’er and has maintained at least a 3 TA rating since May of this year. The stock has been in a positive trend on its trend chart since June of this year and returned to a buy signal earlier this month. From a relative perspective, VSAT ranks within the top decile of the Telephone sector matrix and maintains a long-term RS buy signal against the market, as defined by the S&P 500 Equal Weight Index (SPXEWI). After reversing down into Os during Friday’s trading, the stock reversed into Xs during Monday’s trading (10/13) before giving a second buy signal at $37 during Wednesday’s (10/15) action. TTM is actionable in the upper to lower $30 range. Initial support lies at $32, while additional can be found at $27 and $25.
