Generally, companies between $300M and $2B in market capitalisation are classified as small caps. Their progress can be tracked by the IWM ETF (iShares Russell 2000 ETF).
The ETF dropped heavily at the start of this month. The price fell from $191 to $163 in just over a week. So, are small caps ready to rebound now?
The above is a daily chart of IWM from July 2021 until today. The price has been trading within this descending channel for some time. We think the price could see some buyers at this level and the price could rise to $185.
A further rise in price could lead to a breakout of heavy resistance. This would see the price rally to possibly $200.
The second chart is a weekly from March 2020. There was a key gap in the price over this time, $165.60-$166.40. Price had gapped below this during the pandemic market crash. And during a rally in small caps, the price had once again gapped above and missed this price range.
Since the market began to slide in November of last year, this was always a target for IWM. With that gap now being filled, and S&P500 futures looking to break resistance, check out Twitter, we think there could be a small rally for small caps and IWM.
Crypto has taken a nose dive over the past weeks. Popular coins like Luna have lost over 98% of their value in very short periods of time. We feel this recent drop has led to the end of many accounts. Crypto has often been a volatile market, especially when compared to that of large caps like Apple and Google. However, small caps do offer a fair amount of volatility. Every day, there will often be a few names that have gapped up 20 or 30%. Is there a chance that these crypto traders could turn to small caps, hence adding to the volume and buying power behind these moves? This is just a thought and we will have to see what plays out over the next few months.
Please read our full disclaimers regarding the information published. The above is intended for informative purposes only and should not be taken as investment advice. Trading on leverage can result in losses larger than your initial deposit.