Bullish Technical Events Suggest Gains For These 3 Small Caps

U.S. small cap stocks are finally laying off the snooze button.

After a slumbering January in which the S&P 600 index fell 7%, there have been signs of life in recent days. Small caps have rebounded 6% from their 2022 intraday low and have on multiple occasions led the market’s comeback.

The resurgence of the capitalization spectrum’s lower end has come with a bevy of bullish technical indicators. This has been the case for both the index itself and plenty of individual stocks.

With key inflation data looming and earnings season heating up, things could remain volatile in small cap land. This could mean more gains ahead for stocks that have recently achieved important technical milestones. Here are three names to watch.

Why Is ADTRAN Stock Going Up?

Last week ADTRAN (NASDAQ: ADTN) formed a head and shoulders bottom pattern on the daily chart. The classic chart formation pointed to a short-term climb to approximately $22. The stock appears well on its way.

Sparked by a solid fourth-quarter earnings report, ADTRAN has strung together four straight up days, something it hasn’t done since mid-December. The rally has come with a bunch of bullish crossovers including a move past the all-important 50-day moving average. Better yet, the 200-day, 21-week, and 50-week lines have all been regained. These collectively meant there is a good chance that a long-term uptrend is underway.

ADTRAN added to its bullish technical accolades by reaching stage five of the Elliott wave. This final part of the Elliott cycle signifies a final round of buying before the new uptrend kicks off.

Despite industrywide supply chain constraints, the network equipment provider posted record order growth last quarter. Moreover, analysts were braced for a loss and instead got a $0.10 per share profit. Based on management’s comment about “unprecedented” demand, the fundamentals and technicals seem to be well aligned for ADTRAN.

Has Tupperware Stock Reached a Bottom?

Tupperware Brands (NYSE: TUP) had a phenomenal 2020 thanks to hyper demand for at-home meal containers at the onset of the pandemic. Then 2021 came along with difficult comparisons and reopened restaurants. By the end of the year the stock lost half its value.

Things are looking up again for the old school packaging specialist. Searching for a much-needed bottom, Tupperware recently notched a pair of significant technical events. First, its share price crossed the 50-day moving average which suggests an intermediate term uptrend is afoot. It is a place the stock hasn’t been since early November, shortly before a weak third quarter report caused a high volume gap down.

Then a bullish inside bar appeared on the weekly chart with Tupperware trading just above $15. This valuable candlestick told traders that after a long stretch of dominance by the bears, selling-to-buying activity has become more balanced. In other words, the inside bar means that with sellers losing strength and buyers building strength, an uptrend could be imminent.

Thus far the inside bar has been spot on. Tupperware shares have inched higher for five consecutive days. If they can break resistance at $17, they could be on their way to filling the November gap that started around $24. This may finally be the bottom of the dish for Tupperware. Traders that take the risk here could be in for some delicious gains.

Is Brinker International Stock a Buy?

Speaking of food, Brinker International (NYSE:EAT) is suddenly on the move. Last week it reported fiscal second-quarter EPS of $0.71 that well exceeded the consensus expectation. The stock gapped up in more than four-times the average daily trading volume. By itself this was a very bullish move but like a to-go box at one of its Chili’s restaurants, there have been leftovers.

Two days after the high volume gapper and 50-day moving average crossover, Brinker flashed a pair of bullish technical events. On the weekly chart, the MACD crossed over its signal line. This told traders that the stock price is getting stronger. Adding fuel to the bullish case, was a sharp upward move in the RSI indicator which meant Brinker had emerged from oversold conditions and was taking a market leadership position.

The good news has spilled into this week when the daily chart formed a megaphone bottom pattern with Brinker trading around $40. The bullish development forecasts that the stock will trend towards the upper-$40’s over the next couple months.

Brinker continues to face challenges related to slow dining room traffic and rising labor and food input costs. However, management is managing the environment well by building its off-premises business and launching delivery-only “virtual brands” like ‘It’s Just Wings’. If it can continue to serve up better than expected results, the chart will look even more appetizing.