It's a vicious cycle.
Stocks quietly rise, rally to a peak and crash ... only to do
it all over again.
We're in the painful part of that cycle right now, as stocks
seek a bottom. The small end of the market - small and micro-cap
stocks - is taking it on the chin the hardest.
But the bottom of this cycle is also the time when we can get
lined up for the biggest returns with these little companies, as
much as 10% to 30% … or more … in just a few weeks.
We don't need to go out and buy everything all at once today.
But it's sure a good time to make a shopping list so we're ready
when the right time comes.
And that time could be sooner than many investors think.
Check out this 5-year chart of the Russell 2000
Small Cap Index to see exactly what I mean.
In October, small caps broke below their 50-day (blue line)
and 200-day (red line) moving averages, sending the index back
down toward a critical support zone around 750. At that point we
were close to the 2012 lows.
If we see the index hold this line, it's time to buy small-cap
Near the top of my list is a
that just reported earnings yesterday. It's a tech company that
Bank of America (
, among others, understand their customers better.
That understanding translates into more dollars in its
customers' pockets, which is why
just reported 45% revenue growth in 2012. A post-earnings
sell-off has brought the stock down by $2.00, and opened the door
for a potentially big upside move before the end of the year. You
can learn more about
this company here
That move is by no means guaranteed, but this is exactly the
situation you should be looking for - in this stock or any other
stock you like - be it micro-caps or large-cap favorites like
Apple (Nasdaq: AAPL)
For now, I'm still recommending that investors be patient.
Build your list and get ready.
If we see the Russell 2000 crack the support zone I mentioned
above, we'll just hold our list of potential "buys" and gobble
them up near the next support zone.
But if stocks hold steady, adding some exposure in the coming
weeks will help us catch the next updraft.