One trader's bet against small-cap stocks could have him reaping big rewards.
Todd Gordon of TradingAnalysis.com said Friday on CNBC's "Trading Nation" that he's shorting the IWM ETF tracking the Russell 2000 index because of sector weakness in the index. According to Gordon, two out of the three biggest sector representations in the IWM, financials and health care, have been "pretty weak lately." In Gordon's eyes, this means that the entire index could soon be in trouble.
How far could IWM fall? On a daily chart of the ETF, Gordon indicates that IWM could head back toward its September lows of $120 in the short term. Earlier this week, the IWM also fell $3 from $126 to $123, leading Gordon to believe that IWM is set for another $3 drop to the $120 to $122 range.