Micro cap equities can give investors maximum gains, as seen in the iShares Micro-Cap ETF (IWC), up over 50% in the last six months. As global economies continue to heal, look for micro caps to continue gaining strength.

IWC seeks to track the investment results of the Russell Microcap Index, which measures the performance of the microcap sector of the U.S. equity market. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.

The fund may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index. IWC’s expense ratio comes in at 0.60%.

Overall, IWC gives investors exposure to:

  1. Exposure to very small public U.S. companies
  2. Access to a specific segment of the domestic stock market
  3. Use to diversify a U.S. stock allocation and seek long-term growth in your portfolio

Small caps have been rallying, particularly since November 2020. Micro caps have also been strong performers. The Russell Microcap index is up about 50% within the last six months.

^RUUCAP Chart

IWC has been in lockstep the past six months with the index:

^RUUCAP Chart

Micro Cap Momentum

Micro cap strength became apparent as the ‘golden cross’ emerged on August 24, 2020. This indicator occurs when the short-term indicator moves higher than the long-term indicator.

In this case, it was the 50-day moving average moving higher than the 200-day moving average. Since that day, the Russell Microcap index has risen over 40%.

The relative strength index (RSI) and the stochastic relative strength index (StochRSI) can help confirm momentum. The RSI is well into overbought levels at 74.45, and the StochRSI confirms that momentum at a 0.824 level.

^RUUCAP Chart

IWC’s 6-month chart revealed the golden cross on November 13, 2020. Since then, IWC has risen close to 30%.

In addition, the RSI is into overbought levels at 74.66 and the StochRSI is at 0.848. The fund looks to be making a higher support level to continue the uptrend as the global economy continues the healing process through 2021.

IWC Chart

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