Feb 16 SOTWJoin me tomorrow, Tuesday, February 16 at 12:30 p.m. for our weekly Q&A. We’ll discuss current market conditions including gold and energy bottom-fishing opportunities, and of course we’ll answer your questions about Friday’s Special Presentation. Click here to Register.

The U.S. market appears to be set up for some profitable bottom-fishing for short-term gains. Conditions have been met for the 5-Step Preparation for Breakouts in Oversold Markets that I described in our Feb 6 VectorVest Canada Online Forum. Below are the 5-steps followed by the U.S. Market Timing Graph which shows you what to look for.

  1. On the MTI graph, look for MTI to fall below 0.60 and Stochastics to fall below 20.
  2. Open Views tab and check Derby Winners for Searches with highest 1-Day percent price gains. Buy signal is generated when the majority of winners are Bullish and includes one or more Bottom-Fishing Strategies.
  3. Run the top one or two bottom-fishing searches and place your top candidates in a WatchList.
  4. If you can be at your computer the next day, place your order to buy the top 3-5 stocks that are moving up in the first 30 minutes. Don’t chase however if price opens sharply above the previous day’s close. Be patient. If you can’t be at your computer, place a Buy on Stop Limit order to buy starting at the next day’s open if the stock moves a few cents above the last close.
  5. Unless you’re buying Long Term Winners, start to take profits when price hits your targets and minimize losses if the market immediately goes against you. Either way, be prepared to sell when Stochastics %K crosses above 80 and especially when both Stochastics %K and %D have crossed above 80.
By looking at the MTI graph below, you can see that Step 1 was met last week:
Feb 16 US MTI2

As required in Step 2, look for a majority of 1-Day Derby winners to be Bottom-Fishing searches. Friday, all five were Bottom-Fishing. Blyar’s Bottom Feeders/BMB was the highest 1-day percent price gain at 7.14%.

So, get ready to bottom-fish tomorrow. But be cautious. Make sure the futures are rising and the market opens to the upside. Note that a majority of the stocks in the bottom-fishing searches held energy/petroleum stocks, so make sure crude is rising or at least holding steady and preferably rising before bottom-fishing in those stocks. A good site to check those futures is www.finviz.com.

A Bear Market Scenario to Fear. So while market volatility is continuing, be prepared to take advantage of Bottom-Fishing opportunities. However, continue to be cautious on your longer term positions. Why do I say that? Please read Dr. DiLiddo’s essay in Friday’s Views. He opens with these words, “Unlike the Bear Market Scenario which was signaled on March 27, 2015, this signal is shrouded in ominous circumstances.” Later he noted, Investors buy gold when they are fearful. So let’s not kid ourselves, this is A Bear Market Scenario To Fear. And finally, he suggested long-term investors should learn basic options strategies such as the those discussed last week and again in Friday’s Special Presentation.

VectorVest Canada also showed Friday’s Derby Winners were all bottom-fishing searches led by Jailbreak which had a 5.81% 1-day gain. Jailbreak too was loaded with energy stocks, the exceptions being Concordia Health up 8.22% and First Quantum Minerals up 11.90%. The MTI has not crossed below .60 and Stochastics did not completely cross below 20, so be cautious even when bottom-fishing. Check the futures and be sure the market is rising before stepping in. NOTE: We have often discussed how well our Gold Digger search performs when the average price of the Industry Group closes above its 40-day MA and the MA is at least flat or starting to rise. Well, that happened again on Feb. 1. The top 5 Gold Digger stocks are up an average of 22.77% since then. Is it too late? As mentioned above, investors buy gold when they are fearful. Just check the market and gold futures before stepping in if you haven’t already done so.

Presented by Stan Heller, Consultant, VectorVest Canada

DISCLAIMER: The information contained in this Blog is for education and information purposes only. Example trades must not be considered as recommendations. You should always do your own analysis and invest based on your own risk tolerance, investment style, goals and time horizon. There are risks involved in investing and only you know your financial situation, risk tolerance, financial goals and time horizon.