Mid-Cap Growth

This is a 6-month chart of iShares Russell Mid-Cap Growth ETF (IWP) relative to the performance of the S&P 500 ETF (SPY).

IWP tracks a market-cap-weighted index of growth companies.

The yellow and orange lines are the exponential moving averages that form the indicator called the EMA exp ribbon. The EMA exp ribbon usually acts as support when price hits it from above, and usually acts as resistance when price hits it from below. To break the EMA exp ribbon, and reverse the trend, usually, a single candlestick must pierce through the ribbon (moving averages) with high volume and strong momentum. In this case, the EMA exp ribbon held up as support.

Here we see that mid-cap growth stocks have corrected on the longer timeframes and will likely start to move back up relative to SPY. If this holds true, we can expect that mid-cap growth stocks will begin to outperform the broader index over the long term. For those who invest on longer time horizons, this could be a great time to consider legging into IWP. If you're conservative, you may wish to wait for IWP to breakout above the daily EMA exp ribbon before entering a position.

The current 6-month candle, which started on July 1st, is showing a long upper wick, which indicates that capitulation is still occurring. Capitulation can be seen in candlesticks that occur after a long downtrend, and which have long upper wicks. These long upper wicks after a long downtrend indicate that there are people selling, or shorting, into strength. These market participants usually need to exit before a major bullish breakout occurs.

For the month of June, IWP/SPY printed a bullish spinning top candle (which is a bottom reversal candle). So it's likely that we're in the final stages of capitulation, and soon enough a bullish breakout will occur, (assuming that the relative performance chart accurately predicts price action).