Are you kidding me?
The calendar flips to October and stocks instantly start trading bonkers.
The economic reports aren’t pretty… and the fundamentals are starting to weigh down heavily on the overall market. They are less important to some sectors than others.
For example, lately, I’ve noticed some stocks on my radar that have gotten beaten up, small-cap stocks that don’t typically move with the general stock market.
Well, I’ve also noticed these same stocks bounce back fast too.
Believe it or not, there are indicators that you can use that can help you decipher a range in which a stock may have reached a bottom and a spot where it could begin to climb back up.
I’m not saying I found the holy grail—the ability to buy bottoms and sell tops. But I can get in a ballpark range and that’s all I need to make serious cheddar.
To find these plays, I use a simple and repeatable pattern.
There’s one thing traders love to do when there are panic selloffs — buy the dip… and oftentimes, the amateurs get sliced up… leaving them with scars reminding of how much pain they went through trying to catch a falling knife.
However, when the market gets battered… it’s fish fry time for me — that means I’m looking for my fish hook pattern, which is one simple way for you to time reversals to near perfection.
With so much risk-off sentiment (traders looking to sell stocks), it’s the best time to use this pattern…
… and I want to show you exactly how to spot these fish hook patterns.
Table of Contents
The Solution to Picking Bottoms
How many times have you seen a stock sell-off hard… and thought to yourself, “Wow this stock is cheap! I need to buy some shares at these levels.”?
Only to buy shares… and watch the stock drop even further.
I can tell you that’s happened to me in the early stages of my career.
However, after studying charts on oversold stocks… I realized they all followed one simple pattern — the fish hook. If you can spot that, you can find some lucrative opportunities out there…
… and I’m going to give you the keys to the kingdom today.
The first thing to find the fish hook pattern is to create a filter… and I’ll get you started with one on Finviz.
All I’m searching for here are:
— Small-cap stocks (those with a market capitalization between $300M and $2B)
— Stocks with an average volume of at least 1M shares per day (you can play around with this number if you want)
— Tickers with a share price under $20 (again, you can look for stocks under $5… whatever you’re most comfortable with)
— Relative Strength Index between 10 and 30 (that means the stocks are in oversold conditions)
What you end up with is something like this…
With a chart view, I can quickly eyeball all the charts and see which stocks are currently exhibiting the fish hook pattern.
That’s one of the easiest ways for you to find oversold stocks to trade… and it’s very similar to how I filter for small-cap momentum plays.
The exact setup I look for is this:
Basically, I want to see a steep drop in the stock… followed by a consolidation period, when the stock finds its support level.
Once it starts to catch a bounce, that’s where I want to strike…
… and that brings us to my $13K winner in OSTK.
The other day, I was scanning for trades…and guess what, I went fishing in Overstock (OSTK).
On the 2-hourly chart, I noticed OSTK was catching a bounce… even with the big gap down in the small-cap exchange-traded fund (IWM).
So I decided to take a stab at $9.35, as there was some support around $9.
In less than 1 hour… OSTK popped up by 13% and I took ~$13K in profits off the table!
If you’re skeptical about this pattern, that’s perfectly fine… I want to prove to you that these patterns work, just check out the fish hook pattern in IWM the other day.
I’ve made a special training lesson, just for you so you could understand the power of my fish hook pattern — and two others that have helped me reel in massive profits in the market.
[Ed. Note: Jason Bond runs
JasonBondPicks.com and is a swing trader of small-cap stocks. In 2015 he earned a 180% return on his money. Then in 2016 he turned a $100,000 account into $430,000! Discover How He Did It]
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