We know it’s a bubble. The question is how big of a bubble? Since mid-March the Russell 2000, a proxy for small cap stocks, has surged an astounding 108%, observes Dan Sullivan, technical expert and editor of The Chartist.
Since the October lows the Russell 2000 has outperformed the benchmark S&P 500 by well over two to one. The bottom line is that this market is stretched thin with a more meaningful correction way overdue.
However, we do not feel that the impending pullback will mark the end of this resilient bull market that has bounced back again and again over the past decade.
Our advice for investors who are acting in sync with our real money accounts is to stay fully invested and give this bull market every benefit of the doubt.
In our Traders’ Portfolio — which includes stocks based on high relative strength rankings — IAC/Interactivecorp (IAC) has gained 66.9% since being recommended on August 21, 2020. The mental stop was raised to $171.64 on January 26,
After building a solid base, it has been in a strong uptrend since November with a rising relative strength pattern. Sell-offs have been very mild in scope during this time and currently trades near all-time highs.
IAC is an American holding company that owns brands across 100 countries, mostly in media and Internet. It operates through five segments: ANGI Homeservices, Vimeo, Dotdash, Search and Emerging & Others.
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IAC said Vimeo — after a recent round of funding that valued it at about $6 billion — is scheduled to be spun off early in the second quarter.
Also in the Trader’s Portfolio, the mental stop for MercadoLibre (MELI) was raised to $1,521.60 on January 26. Since recommending it on June 4, 2020 it has gained 117.3%.
The shares have been in a solid uptrend since its mid-February low at $959.87. It reached a high on January 20 at $1,984 but has since come under selling pressure to its current price at $1,844.73. Short-term support is in evidence at $1,564.
Based in Buenos Aires, Argentina, it is Latin America’s leading e-commerce technology company. It operates MercadoLibre Marketplace, an automated online commerce platform.
The platform enables businesses and individuals to list merchandise and conduct sales and purchases online and MercadoPago FinTech, a financial technology solution platform allows its users to send and receive payments online, and allows merchants to process transactions via their Websites and mobile apps.