They say a picture is worth a 1,000 words. And no trader worth his salt would ever pull a trade without looking at a chart.
In today’s fractured market, it is worth taking a step back to look at the big picture before determining what may be worth some value.
Here is the S&P 500, the mother of all market indexes.
The average run in a candlestick chart, either up or down, is three to five units. As you can see, we’ve had 10 up units in a row. If this were baseball, you’d say it was due for a strikeout.
Even more astonishing is that this is a 10-year chart where each unit represents three months.
This is now the third-longest bull market in history. We’ve gone more than 950 market sessions without a 10% correction.
But like in baseball, streaks have a way of going further than you think.
It is impossible to know if the broader market will continue to go up or if we’ll get that correction everyone is pining for. I do know the goal of investing is to buy low and sell high.
The S&P 500 is not low. It is not 2009, 2002, or 1981.
You can make the argument that it’s 1998 and we will see a crazy ramp-up, but it’s not the bottom.
Personally, I like to buy stocks that everyone hates. I like to buy at what Sir John Templeton called the “point of maximum pessimism.”
Buying low works for the simple reason that no one is left to sell. The only traders left are the buyers.
Today, let us look at some stocks that are low…
Safe Bulkers (NYSE: SB) is a dry bulk shipping company. There are too many ships coming online and very little trade volume.
Everybody hates dry bulk shipping. It is low. It is also a stock that could triple over the next two years. Full disclosure: I own this in Crisis and Opportunity.
Here is another cheap stock for you…
Wynn Resorts (NASDAQ: WYNN).
For years, WYNN could do no wrong. Then the new Chinese leadership cracked down on gambling.
My bet is that they will come back to the tables, but we are probably too soon on this one.
I like to buy after the dead-cat bounce, when there is a double bottom or some other trend reversal signal.
But put WYNN on your radar — it is always good to be the house.
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Or how about TransGlobe Energy (NASDAQ: TGA). It develops oil and gas properties in Yemen and Egypt.
Again, we are a bit too soon, but when it pulls back to $3, it is worth checking out.
Who would invest in a Yemen oil stock? People looking for a 500% gain, that’s who.
One bottomed-out stock I did tell you to buy (on March 12, when it was at $21.99) was the Junior Gold Miners ETF (NYSE: GDXJ).
It has been walking higher ever since. If you had the stomach to buy GDXJ, congratulations. You are up 20% in a little over two months — handily beating the S&P 500, with plenty more upside to come.
If you liked that trade, you should try my contrarian value service, Crisis and Opportunity. At this time, we are offing a free trial period for the first 30 days.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
