Active traders spend countless hours scouring the markets for niche segments that look poised to outperform the broader markets. The one group that is gaining prominence on the watch lists of traders is mid-cap growth stocks. This group traditionally comprises companies with market capitalization ranging from approximately $2 billion to just north of $10 billion. These companies also often display earnings power that is set to outpace the broader market. In this article, we'll take a look at several charts and try to determine how traders will be looking to position themselves over the weeks and months ahead.
iShares S&P Mid-Cap 400 Growth ETF (IJK)
When looking to gain exposure to niche segments such as mid-cap growth companies, active traders often turn to exchange-traded funds (ETFs) such as the iShares S&P Mid-Cap 400 Growth ETF (IJK). As you can see from the chart below, the price recently moved above the combined resistance of its 200-day moving average (red line) and dotted trendline. The breakout and subsequent retest of the newfound support near $218.35 suggest that the bulls are in control of the momentum. Traders will now most likely set their short-term target prices near the 2020 high of $247.22. Stop-loss orders will most likely be placed below $213.58 in order to protect against any surprise selloffs.
FactSet Research Systems Inc. (FDS)
As one of the top holdings of the IJK ETF, FactSet Research Systems Inc. (FDS) will likely capture the attention of many active traders because of its strong uptrend and recent bounce from the 200-day moving average. The break beyond the dotted trendline, which is shown by the blue circle, is a clear technical indication that the bulls are in control of the momentum and that the next leg of the uptrend could just be getting underway. From a risk-management perspective, stop-loss orders will most likely be placed below $293.27 or $271.15, depending on risk tolerance and investment horizon.
Catalent, Inc. (CTLT)
Another top holding of the IJK ETF that could capture the attention of active traders is Catalent, Inc. (CTLT). As one of the companies in the hunt for a vaccine to COVID-19, the price of the stock has responded to increased speculation, which in turn has pushed the price above its 200-day moving average and a key ascending trendline. Based on recent price action, technical traders will likely expect the uptrend to continue and place stop-losses below the support of the trendline or its 200-day moving average, depending on risk tolerance.
The Bottom Line
The mid-cap growth segment of the financial markets seems to be positioned better than most from a technical perspective and will likely capture the attention of bullish active traders for weeks to come. More specifically, nearby support levels and breakouts beyond key levels of resistance provide ample trading opportunities with a defined level of risk.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.