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A 'Buy the Loser' Rally 6 comments

by: Bespoke Investment Group July 21, 2008 | about: AN / DDS / FITB / FNM / FRE / GMGMQ.PK / HBAN / IVV / KEY / LEH / MBI / MI / MTG / NVDA / ODP / RF / SPY / STI / WB / WM / XL / ZION

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If you didn't own the dregs of the S&P 500 going into the rally that started last Wednesday, chances are you have underperformed over the last few days.

We broke the S&P 500 into deciles (50 stocks in each decile) based on stock performance from the 5/19 high to the 7/15 low and calculated the average performance of stocks in each decile since the 7/15 low. The average stock in the S&P 500 has risen 6.44% since then. The 50 stocks that were down the most from 5/19-7/15 are up 26.4%. Conversely, the 50 stocks that held up the best during the recent market declines are only up an average of 0.99%.

Clearly, this has been a buy the losers rally.

click to enlarge

Below we highlight the 20 worst performing stocks from the 5/19 top to the 7/15 low. As shown, they are up a whopping 37% since 7/15. Unfortunately, not many people still owned shares in them last week.

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Related Stocks:

AN, DDS, FITB, FNM, FRE, GMGMQ.PK, HBAN, IVV, KEY, LEH, MBI, MI, MTG, NVDA, ODP, RF, SPY, STI, WB, WM, XL, ZION

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This article has 6 comments:

- oldlures1:
- Comments (71)
Perhaps the more appropriate title would be "A 'Buy the OVERSOLD' Rally"? But then, I guess anything slightly optimistic just wouldn't fit in here on SA, would it? *sigh*
2008 Jul 21 02:24 PM | Link | Reply
- Calvin C.:
- Comments (78)
Classic short squeeze rally no doubt.
2008 Jul 21 03:14 PM | Link | Reply
- Toeser:
- Comments (49)
This is a well understood trading technique. I have software for back-testing and buying the biggest decliners at an interim or final bottom works a huge percentage of the time for a quick buck.
2008 Jul 21 03:58 PM | Link | Reply
- truthinvesting:
- Comments (166)
- • Website: http://www.atfreeforum.com/billyticketswin...
yes very astute. Most of the strong companies listed by the gurus on my website have not yet particpated in the rally.
2008 Jul 21 09:57 PM | Link | Reply
- Chris C:
- Comments (14)
- • Website: http://www.jecsystems.com
Time to hurt the shorts, I say.

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2008 Jul 22 04:25 AM | Link | Reply
- bob s:
- Comments (2)
i would like to try this software, can i get a copy?

On Jul 21 03:58 PM Toeser wrote:

> This is a well understood trading technique. I have software for
> back-testing and buying the biggest decliners at an interim or final
> bottom works a huge percentage of the time for a quick buck.
2008 Aug 03 10:52 AM | Link | Reply