The Technicals are Still Bullish for These 3 Small Caps

The faster they rise, the faster they fall.

That has certainly been the case for U.S. small-cap stocks. After climbing more than 150% from its pandemic low, the S&P 600 index has faced a harsh reality check in recent weeks. An escalating geopolitical crisis together with inflationary and supply chain pressures have put the capital markets firmly in risk-off mode. 

The duration and magnitude of the current market correction are anyone’s guess. What we do know from history is that at some point stocks will be perceived as oversold. When this happens, smaller companies once deemed taboo will turn into risk-on winners.

That means stocks that have good underlying technical patterns will be in a position to rise to the top. Despite the broad market weakness, these three small caps have surprisingly bullish longer-term technicals—and are in the driver’s seat to rebound quickly.

What are the Highlights of Duluth Holdings’ Chart? 

Duluth Holdings Inc. (NASDAQ:DLTH) had crossed over its 50-day and 200-day moving averages, before Russia effectively declared war on Ukraine, and in the process did the same on global equity markets. Fortunately, the stock is still clinging to a bullish engulfing line that took hold at the end of last month. This suggests that a reversal is still in play over the intermediate-term. 

A less favorable development is the stock’s downward breakthrough of the $13.50 level where it has found support on three occasions since September 2021. The good news is that trading volume has been light during the recent slide, which suggests further downside is limited. 

The silver lining here is that Duluth Holdings has dipped significantly below the lower Bollinger band on the daily chart. Historically these have been great times to buy. 

If this stock can claw its way back to long-term resistance at $15 and stage a high volume breakout, it will probably be off to the races. In this scenario, the $20 mark seen in late-June 2021 stands to be revisited. Duluth’s fourth-quarter report on March 10th could very well provide the necessary spark. 

How Much Downside Does Celestica Stock Have?

Celestica, Inc. (NYSE:CLS) has held up relatively well during the correction. On the weekly chart it is trading comfortably near its recent peak and within striking distance of the $12.48 long-term resistance level. What is more encouraging is that volume is below what it was last week when the stock ran approximately 4%. 

In late December, Celestica’s daily chart formed a symmetrical continuation triangle when it traded at $10.76. The bullish pattern pointed to a run above $12.50 which the stock easily achieved. It went on to reach the $13 level for the first time in five years. Celestica has since been hesitant to give up much ground, which combined with benign downside volume suggests a near-term return to that level is forthcoming. 

The relative strength indicator (RSI) is also strong but not too strong. At around 70 on the weekly chart, the electronic component maker has been an unlikely technology sector leader this year. It delivered a solid fourth-quarter report that topped the Street on both revenue and earnings. The stock has caught the attention of value investors which should keep the floor close and the uptrend intact. 

Is it a Good Time to Buy RPC, Inc. Stock?

RPC, Inc.’s (NYSE:RES) charts have looked very healthy since the oilfield services provider posted impressive fourth-quarter results and offered a bright 2022 outlook. It certainly helps that the company resides in the lone sector that is crushing it this year amid soaring energy prices. A diverse U.S. customer base has been a source of rising demand for RPC’s core pressure pumping services. 

Meanwhile, RPC shares have been in demand from traders looking to scoop up anything oil-related to participate in the momentum. As a result, the stock has climbed to its highest level since May 2019 and in the process created some bullish technical events. 

Since RPC simultaneously regained the 50-day and 200-day moving averages at the start of the year, it has continued to distance itself from the key trend lines. Volume has picked up in the process thanks to the impressive quarterly report and growing interest in energy stocks as inflation hedges. 

Last week, phase three of the Elliott Wave cycle was attained just shy of the $8.00 mark where the stock is currently hovering. This is considered the longest and strongest of the cycle’s five waves and therefore a good time for investors to hop on board. Bullish oil industry dynamics and convincingly bullish technicals suggest the ride is far from over for this emerging small-cap.