Watching 2 Stocks After PPI Surprise, Small-Cap Weakness

A much hotter than expected PPI report caused a sell-off at the open on Thursday morning, but dip buyers wasted no time and have helped to recover most of the losses. 

Small caps are lagging after a couple of days of outperformance as money rotates back into mega-cap technology names. The Magnificent Seven is leading with a 0.6% gain, but breadth is solidly negative due to the small-cap weakness.

Small-cap stocks have a history of fizzling out after a few days of outperformance, and that looks like the situation once again.

As I mentioned on Wednesday, I've been taking some profits and repositioning after a very good run. I'm not bearish, and I don't expect a major correction, but I want to reset a bit mentally and make sure I don't give back some good recent gains. I have quite a bit of cash on hand now, and might underperform, but if the indices go straight up from here, I want to find some better entry points and build some more concentrated positions.

I mentioned that I was aggressively buying Harrow, Inc. HROW on Tuesday morning when it dipped sharply following its earnings report. It has recovered and is now back near its highs. Currently, analysts' expectations are for earnings of $0.33 in 2025 and a jump of 440% to $1.82 in 2026. There are price targets in the $60s, which look quite reasonable if those estimates are close.

Another name I'm watching here is Eos Energy EOSE. The company is developing battery technology and is just starting to recognize substantial revenues. Technically, the chart looks favorable if it can move over the $6.50 level on volume.

My game plan is to tighten up stops, protect recent profits, and stay selective with new buys. I'd like to build more concentrated positions in the best-looking names that I see, like HROW.

I'm not going to worry too much about what the indices might do and will focus more on the technical setups in individual stocks.

At the time of publication, DePorre was long EOSE and HROW.