Are Small Caps About To Croak?

Don't take this the wrong way.

I actually love the small caps, but today's article is featuring JFrog, Ltd (FROG), a $4.7 billion software company that traded over $95 per share in 2000, before falling back to under $20 more recently. I believe a double bottom has formed and FROG is now situated quite bullishly in an uptrend. Rapid earnings growth in small caps usually results in rapid price acceleration as well, especially when this asset class is in favor. Because the IWM (ETF that tracks the small cap Russell 2000) is now showing signs of an uptrend and it recently broke out of a bullish cup with handle continuation pattern, it's time, in my opinion, to take on additional risk in the form of small cap stocks:

Enter JFrog Ltd. (FROG):

Yes, it's overbought and could pull back at any time. A better reward-to-risk entry would be closer to 40-41, but many times overbought becomes even more overbought and if we're currently entering a period of significant bullishness for small caps, FROG could literally "leap" higher. I suspect we could see a longer period of consolidation after FROG hits an area of consolidation in the 50-55 range. The volume that accompanied FROG's latest quarterly earnings report and gap higher was its 2nd largest ever - trailing only its IPO day. That suggests accumulation to me.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.