We have a dramatic shift in small-cap momentum this morning as the 'hot pockets' of action suddenly disappeared. This is due in part to a major shift in the electric vehicle sector with recent winners like NIO (NIO) , Li Auto (LI), and CBAK Energy (CBAT) falling sharply. This sudden reversal in momentum has spilled over to SPACs and other recent speculative favorites.
Recently there have been dozens of stocks that are up more than 10% intraday as traders hunt for the big movers. That list has contracted to just 12 names currently. Breadth isn't that bad at 2 to 1 negative but the number of new 12-month highs has collapsed to just 80 after hitting 10 times that number in the last few days.
This sudden shift in momentum isn't too much of a surprise. It is the nature of the small-cap stocks at times. Momentum cuts in both directions and it can make for some good bounce opportunities if you move quickly.
The key right now is to be clear about time frames. There may be some good intraday bounce plays but this sort of action hurts the charts for longer-term positions trades. It may take some time for the charts to find support and turn back up after suffering a very fast drop.
My plan here is to do some bottom fishing as this develops and support levels hold. I'm not going to rush to conclude that this selling squall is over but I do not think that this is a major market top at this point. This is just a correction of some excessive small-cap speculation and that should lead to some good entries again very quickly.
One name I'm trying to add on weakness right now is Trine Acquisition (TRNE) which has a merger vote due next week. There seems to be strong support so I'm slowly nibbling when I have a chance.