Royals held on to eighth place in the table over the weekend despite the postponement of their fixture at Doncaster Rovers on Saturday due to a frozen pitch.
It leaves McDermott's men seven points behind second-placed Southampton with a game in hand and a trip to the St Mary's to come in April.
And after boosting his squad with the signings of Jason Roberts, Matthew Connolly, Tomasz Cywka and Karl Sheppard in January, it seems McDermott is refusing to give up on automatic promotion.
Speaking ahead of Saturday's home clash against rock-bottom Coventry City (3pm), McDermott said: "Look at the squad, in the last 22 games we're top of the league.
"We took four points from the first 18 available, but we're top of the league since then. We're going in the right direction, The boys are doing really well.
"We've won eight games from the last 11 and we beat a decent Bristol City side last time out which was important.
"Southampton and West Ham are coming back towards the pack, which is good for everyone involved and for where we want to get to.
"The table has condensed. We were 17 points behind Southampton at one stage, now it's six points which is a lot better."
While leaders West Ham and Southampton may be looking over their shoulders, in-form Royals are determined to maintain their superb run of late.
They will be strong favourites to beat basement club Coventry City at home this Saturday and strengthen their promotion bid (3pm ko).
Sky Blues are marooned at the bottom and are seven points from safety after their survival hopes received another blow at the weekend in a last-gasp 3-2 home defeat by Ipswich Town.
Reading, on the other hand, look to be in excellent shape going into the run-in after new owner, 29-year-old Russian Anton Zingarevich, backed McDermott in the transfer market.
Royals pulled off a major coup by signing Blackburn Rovers striker Roberts, who duly scored on his debut in the Bristol City win.
And McDermott revealed he was also interested in signing Manchester City's Wayne Bridge, Blackburn Rovers' Keith Andrews plus Brighton striker Craig Mackail-Smith.
"We missed out on a couple who went to the Premiership, so we're talking about good players," he explained.
"We spoke about Wayne Bridge and he went to Sunderland. I spoke to his agent and to Man City, I think we could have done it. We'd have paid a small percentage of his wages, but that's gone now, he made his decision and good luck to him.
"Mackail-Smith would be very, very expensive. We investigate a lot of people, we didn't follow through on that one.
"I know Keith Andrews and his agent, we had a conversation but he had the opportunity to go to West Brom on a six-month deal in the Premiership.
"So we knew all the situations going on. Nicky Maynard went to West Ham for three-and-a-half years and a lot of money.
"I know all the players who are out there and I also look at the players we've already got, which is really important.
"Adam Le Fondre, Simon Church, Noel Hunt, Jason Roberts, Karl Sheppard - we've got strikers who can do it."