Picking bottoms (or a top) in a stock is one of the most difficult jobs on Wall Street and it is something which I rarely attempt to do. There is, however, one time of year that I have had success in finding deeply oversold stocks which have produced incredible short term percentage moves over the course of 2-3 weeks. Now is that time of year!
The best description of the “January Effect” comes from Wikipedia “The January effect (sometimes called “year-end effect”) is a calendar effect wherein stocks, especially small-cap stocks, have historically tended to rise markedly in price during the period starting on the last day of December and ending on the fifth trading day of January. This effect is owed to year-end selling to create tax losses, recognize capital gains, effect portfolio window dressing, or raise holiday cash. Because such selling depresses the stocks but has nothing to do with their fundamental worth, bargain hunters quickly buy in, causing the January rally.”
I do not think it is as precise as the last day of the year and then selling on the fifth trading day of January, but the reason in this description is valid (except raising holiday cash, do you sell your stocks so you can buy a nice present for your wife?).
Keep in mind that the stocks on this list are not in good technical condition, the charts all look terrible! Also, the fundamentals for these companies are probably lousy. These stocks should be looked at as HIGH RISK and you should consider buying a basket of them across different industries to spread the risk.
Below are the symbols for some potential beneficiaries of the January Effect. I have done zero fundamental research and I suspect that some of the names on this list will be bankrupt in 09, they are just potential TRADING ideas. I wouldn’t buy and hold any of them. Be sure to do your own research and manage risk.
Over the coming days I will narrow this list down to find the best ones.
AER AFFX ALD AMKR ANAD ARM AXL BC BYD BZH CEM
CPE DDR DDS DYN ESLR FCSX FIG FLEX FTK GFIG
GGP GKK GLBL GLS GU HERO HOV HRZ IO IVN
KEG LEA LINTA LNG LPX LZB MEA MPEL MTL MTSN
NCX NOA NRO OCNF PLLL PSUN REXX RT S SRZ STKL
STX TEN THC TNL TRW TTI TXCO VCI VQ VSH WRES
XL XTXI ZLC