Now I am confused. Let me recapitulate and hopefully you can clarify and point out my error.
I asked about a company [ISRG] that you appropriately pointed out on this thread, Small Cap Fireworks. Today it is a medium cap company with a market capitalization of almost $4 billion. But when you signalled its breakout about 18 months ago, its market cap was only about $600 million, a small cap for sure.
When I asked if you tend to buy these small cap stocks when they break out, you responded that you tend to do so if the short term market trend is up. And when I asked which market you were referring to, you responded: Russell 3000 index.
Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. As of the latest reconstitution, the average market capitalization was approximately $4.8 billion; the median market capitalization was approximately $944.7 million. The index had a total market capitalization range of approximately $386.9 billion to $182.6 million.
russell.com
I expected that if you were looking to confirm a breakout in a small cap stock, you would use a small cap index like the Russell 2000.
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $664.9 million; the median market capitalization was approximately $539.5 million. The largest company in the index had an approximate market capitalization of $1.8 billion.
ibid.
So I ask you, Julius: Wouldn't the Russell 2000 be a more appropriate index to use for trend analysis to confirm a breakout in a small cap stock than the Russell 3000 index?
Sam |
