A short time ago, I told you about one of my favorite short targets – the iShares Russell 2000 Growth ETF (IWO).
The IWO is a growth-focused exchange-traded fund (ETF) that represents the two areas seeing the most underperformance right now…
Small-cap stocks and growth stocks.
Then, I added IWO to my Watchlist Update as a short idea, and mentioned that growth stocks have come under some pretty heavy selling pressure over the last couple weeks.
Many hedge funds started selling the tech sector heavier than they had in more than 10 years.
Along with the persistent underperformance of small-cap stocks found in the Russell 2000, that made me believe we had a strong candidate for a short investment.
The Big Break
Well, most recently, I’ve been watching for a break of the big support level at $275.
And this past Monday, it triggered…
Remember, the small-cap stocks of the Russell 2000 index have been mostly flat for almost a year now.
At the same time, we are currently seeing a rotation out of growth stocks with high price-earnings (PE) multiples.
Taking A Step Back…
While the move may not look significant on the daily chart above, things change when we zoom out and take a look at the weekly chart.
The picture becomes much clearer…
As you can see above, the $275 area has held as support for a year.
Not only was this key support level recently breached, but the index is now trading firmly below its 50-, 100- and 200-day moving averages!
Additionally, notice the high selling volume over the last several weeks…
The numbers are in line with the selling we saw during the COVID selloff in early 2020, with relative strength also making new lows.
To me, what we’re seeing here is a big warning sign that institutions are beginning to sell in size.
And when all signs point in this direction, we should definitely take notice before it’s too late!
Embrace the surge,
Editor, Stock Surge Daily