Monitor Your Favorite Small-caps for an Entry Point
Thursday, September 11th, 2008
By George Leong, B.Comm. for Profit Confidential
Stock markets continue to trade cautiously, with swings in both directions, although the overriding bias is negative, with selling surfacing in recent days, as stock markets threaten to move lower. The DOW lost 280 points on Wednesday after a 289-point gain on Monday. Prior to that, the DOW plummeted 355 points on the previous Thursday.
In the housing market, the current situation and outlook remain bleak, with record home foreclosures and late payments. The declining wealth in the housing market will continue to impact consumer spending and economic growth going forward.
There had been some optimism in the small-cap sector, as the Russell 2000 was near breakeven recently. However, with the recent selling, it is back down nearly eight percent, and it will be driven by the economic outlook. The same cannot be said for the over 15%-16% declines in the DOW and S&P 500, as well as the nearly 17% drop in the NASDAQ. Unless we see a major reversal, stocks are set to end lower this year for the first time since the bear market in 2002.
My feeling is that small-cap stocks will continue to outperform in the longer term. The historical statistics reflect this. The key for you as an investor or trader is to monitor a group of small-cap stocks that you like and wait to pick up or add to a position should the stock decline significantly.
An example of this a few months back was Brown Shoe Company, Inc. (NYSE/BWS), which fell to a 52-week low of $11.89 on March 17, but has since been trending higher. It traded as high as $18.00 thereafter, for a gain of over 50% on a bounce. These types of situations occur more frequently than you may think, but you need to monitor the market closely on a daily basis.
Next Post: Taking the Market’s PulsePrevious Post: Why It’s Important to Have Strict Risk Controls
Tags: bear market, stock market
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
