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Small Caps: Profiting From The Continued Rally

The markets are sharply higher again today. A mega reversal took place on Friday and solidified choppy upside through the Labor Day holiday weekend. The markets have now had three higher pivot lows since the SPDR S&P 500 ETF (NYSE:SPY) hit the low of $110.27 on August 9th, 2011. These higher lows continue to tell intelligent traders and investors that the market has a little more upside for the next week or two. A possible upside target on the SPY would be $124.00 – $126.00. In that range, major resistance will begin to pound the markets.

Many stocks have already surged higher over the last couple weeks. Most investors are now looking for the next beaten down area to profit from. While stocks like Apple Inc. (NASDAQ:AAPL) and International Business Machines Corp. (NYSE:IBM) have already jumped, small caps may be the next area to find bargains.

Many small cap plays are extremely low on the charts. Look for plays discounted at their 52 week lows that do not have company specific negative news. In other words, find small cap and even some mid cap plays that have been hammered due to the markets weakness and not bad earnings or another bad press released. A few long ideas are AgFeed Industries, Inc. (NASDAQ:FEED) and Origin Agritech Ltd. (NASDAQ:SEED), two Chinese small cap agriculture plays.

Gareth Soloway



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