Publish date:

The Market is Closing the Gap Between Big- and Small-Caps

James ‘Rev Shark’ Deporre says small caps are setting up well heading into earnings season.

As traders prowl for market opportunities this week, the gap between extended large-cap stocks and beaten-down small-caps is beginning to narrow.

That at least is the takeaway from James “Rev Shark” Deporre.

“We have some rotational action hitting Monday morning with all of the FATMAAN names trading in the red while breadth is running about five-to-three positive, and the Russell 2000 (IWM) is up around 1.3%,” Deporre wrote recently on Real Money. “Stock pickers are hard at work and looking at the secondary names that have lagged since February.”

Rev Shark says the big news is a “closing of the gap” between some of the most extended big-caps and rotation into the beaten-up secondary names. “The gap has grown very wide, but it has been narrowing for a few weeks now,” Deporre said.

Deporre says he’s focused on stock picking, as many of his favorite stocks are doing well.

“On Friday, I discussed why I was buying dMY Technology Group, Inc. III (DMYI),” he said. “It’s my Stock of the Week, and it continues to perform extremely well. Long-time favorite Ammo, Inc. (POWW) announced an increase in revenue guidance for the third quarter, and Xeris Pharmaceuticals (XERS) - Get Xeris Pharmaceuticals Inc Report is up due to a recall of a competitive product.”

Rev Shark said he expects to see more strength in secondary stocks as we head into third-quarter earnings season in October. He’ll continue to be looking for more buys this week.

Get more trading strategies and investing insights from the contributors on Real Money.

Get more trading strategies and investing insights from the contributors on Real Money.

TheStreet Recommends