Free Trial

Russell 2000 ETF Momentum Sparks Volatility In Small Caps

Russell 2000 ETF

Key Points

  • The iShares Russell 2000 ETF  has seen a surge in momentum, signaling a shift in market sentiment and risk appetite.
  • The IWM's strength has led to increased attention and speculative capital flowing into the small-cap sector, resulting in larger moves and higher volatility for individual stocks.
  • Small-cap stocks like Biophytis, GreenPower, and Prestige Wealth have experienced significant gains and extraordinary trading volumes amid the IWM's impressive upward momentum.
  • 5 stocks we like better than iShares Russell 2000 ETF

The iShares Russell 2000 ETF NYSE: IWM has experienced impressive upward momentum in recent weeks. The result of the continued strength in the IWM has been a recent surge in volume, attention, and volatility in the small-cap market.

As a float-adjusted, capitalization-weighted index that tracks the performance of small-cap stocks in the U.S. equity market, the IWM, according to the MarketBeat ETF screener, has historically been sensitive to market sentiment and risk appetite. During times of uncertainty and market downturns, small-cap stocks have often suffered from risk-off outflows, resulting in relative weakness compared to their large-cap counterparts. Marketbeat ETF Screener 

However, a notable shift has occurred, and the IWM is now garnering increased attention as speculative capital flows back into the small-cap sector.

Impressive Upward Momentum

Russell 2000 chart
For most of the year's first half, the IWM spent most of its time lagging the overall market and trading near $170 critical support. However, as previously written, a considerable sentiment shift occurred when the IWM broke above the $180 resistance and firmly held above, experiencing significant upward momentum. 

Since the breakout, the IWM has retested previous resistance and successfully turned it into a level of support. After making a higher low above this level, the IWM firmed up and began another leg higher, now basing firmly over $190. YTD, the IWM is now up over 11% thanks to its sharp move higher over the last three months.

While small-cap stocks have historically carried far more risks due to their market volatility and lack of liquidity, the current risk-on environment and renewed interest in the sector offer potential opportunities for investors, especially short-term momentum traders.

A Healthy IWM Leads to Larger Moves In Small Caps

A strong market resulting in increased optimism and speculation is the primary catalyst for overall small-cap volatility. As the overall market experiences notable strength and bullish trends, investors and traders have sought opportunities with higher potential returns, leading them to explore small-cap stocks.

Three recent examples of low-float, small-cap stocks benefiting from the current environment are Biophytis NASDAQ: BPTS, GreenPower NASDAQ: GP, and Prestige Wealth NASDAQ: PWM.

As I write this, BPTS is up 62% in the pre-market, having traded over 5.2 million shares. Why is that so impressive? Well, BPTS has an average daily volume of just 9000 shares. 

Yesterday, shares of GP, with a market capitalization of $129 million, closed the day up over 44%. Even more impressive is that the stock, which has an average daily volume of just 623,000 shares, traded over 35 million shares in yesterday's session.

PWM, like GP, closed the day up over 45% yesterday. With a market capitalization of just over $200 million, the recent small-cap IPO traded almost six times the previous day's volume yesterday.

The strength of the IWM and the overall market has led to a remarkable increase in volume, volatility, and attention for small-cap stocks. The above are just three brief examples. Over the past few weeks, several small-cap stocks are moving on fresh news and unusual volume daily. 

→ Bitcoin’s Biggest Year Yet (From Paradigm Press) (Ad)

Should you invest $1,000 in iShares Russell 2000 ETF right now?

Before you consider iShares Russell 2000 ETF, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and iShares Russell 2000 ETF wasn't on the list.

While iShares Russell 2000 ETF currently has a "hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

7 AI Stocks to Invest In: An Introduction to AI Investing For Self-Directed Investors Cover

As the AI market heats up, investors who have a vision for artificial intelligence have the potential to see real returns. Learn about the industry as a whole as well as seven companies that are getting work done with the power of AI.

Get This Free Report
Ryan Hasson
About The Author

Ryan Hasson

Contributing Author

Technical Analysis, Momentum Trading, Risk Management

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
iShares Russell 2000 ETF (IWM)N/A$224.54+3.4%1.18%N/AN/AN/A
Compare These Stocks  Add These Stocks to My Watchlist 

Featured Articles and Offers

Recent Videos

How to Navigate Stock Downgrades
CPI News Breakdown: Key Market Moves to Follow
Understanding Oversold Stocks

Stock Lists

All Stock Lists

Investing Tools

Calendars and Tools

Search Headlines