January effect stock plays are coming. This is a simple trading trend that repeats every year with beaten down small cap stocks that had been lagging the market all year.
What happens is that these stocks tend to get hit by waves of tax loss selling in December to create a selling climax in them as people harvest their losses for tax reasons and money managers get them off their books in embarrassment. This clears the way for a rally once the sellers exhaust their inventory.
One stock this has happened to is TRIL to give you an example.
What you need to see to identify a January effect stock is a stock that has been falling all year into December, but has managed to consolidate for a few weeks to create a new clear resistance and support range. You then look for a breakout.
I had been looking for this pattern to materialize in the popular dope stocks as they have been among the worst performing stocks all year, but it has not begun yet as ACB made a new low on Friday and TLRY did too.
People want buys in dope stocks because so many people are in them. The masses like to here buys on stocks they already own. That’s why CNBC talks about AAPL just about every time you turn on the their shows.
But now is not the time for the dope stocks. Maybe they will line up good in a few more weeks.
Here are several stocks though that are lining up for potential January effect rallies.
Exercise stock NLS is basing. One thing I like to see in these setups is the on balance volume trending up.
And this is happening with OCGN.
VSTM may be the best candidate now.
Now these type of stocks are not good for buying and holding. These are not investment grade stocks, but stocks only for trading plays in which you have to be willing to sell and take profits once you get them.
These stocks are nowhere near the caliber of my top stock pick of December.
Nor are not they enough to make my lost of Top Seven Trades in the Power Investor group.
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