After a poor start to Barclays Premier League life, the Royals are starting to show their worth and have collected four wins from their last seven league games.
Reading remain in the relegation zone despite that run but McDermott, crowned January's manager of the month, believes the atmosphere at the club bodes well.
"You can see the environment they're around, you can smell it, you can always smell when there's a good environment," he told Sport 360.
"You can look around this group and think there's a chance for these guys to do something.
"We were written off in April [last year, when we confirmed promotion by winning the npower Championship] but we're right in the mix. What I see with the players here is that there is so much more to come."