bowater

Is December the New January for Small Caps?

I discovered the "January effect" in 1972 when I became a stockbroker. I began using it in 1973 and thereafter. I didn't call it the "January effect" but I used it as part of my recommending strategy throughout my career. It was most effective with new underwritings that came public in June that were hammered in December. Everyone was short term in the new issue in December and after the last trading day in December, all the short term sellers for the year were out.
In January the stock could rally on light volume because in January there were no more tax loss sellers or profit takers because no one had a profit and no one take a tax loss in January.( two reasons why stocks come under pressure are tax loss selling and profit taking. In this example neither were present.)(In the old days 6 months was short term for tax purposes.)

Taking Advantage of the January Effect

one final statement: the january effect has little to do with Obama, earnings, any announcements about the economic condition, rates ,.

it is based on taxes.

Taking Advantage of the January Effect

the fact that there is so much skepticism and worry about the January Effect, and theories about why or how it work is the very reason why my method works. My method is based on fact not theory.

Stocks go up and down based on buying and selling. other than trading on inside information, Dec and Jan trading is the most profitable.

the best trade is finding an IPO priced high in Jan of 2008 and now is Dec trading at 25% of the high.

It has a double tax loss because EVERYONE in the stock is short term.
It will bounce big in Jan 2009.

Taking Advantage of the January Effect

the method i use(explained above) is not based on any theory.

it is based on fact.

what causes stocks to go down or stay down.....selling(profi... taking or tax loss selling)

in my examples of the picks in December, there is no profit taking, only tax loss selling in these.
almost no one takes a tax loss in January. so the selling pressure is off the stock.
the profit takers in January are investors that shorted the stock at high prices in the early part of the year. they are buyers covering their shorts.
this buying moves the stock higher.

if they shorted a stock at $10.00 and it is now $2.00, they cover.

Covering at $2.00 or $3.00 is fine. YOU buy at $2.00 in Dec and sell at $3.00 in Jan.
I have seen stocks that were $8.00 that are now .55 cents. o.k. companies. these could go to $1.00 or more.

Taking Advantage of the January Effect

I agree with your general theory of the "january effect". ETF's are good.

More money can be made with individual stocks. More work, more profit.

I don't think any ETF will be up 100% by January 15th,2009

But some stocks in the ETF will.

you must find those stocks.

here is how I proceed:
1) find a company that will not go out of business in the next 2 years.
2) make sure that the stock of this company was shorted at high prices during 2008.
3) this stock must be able to double from the current price and not
reach 50% of the 2008 high to be a candidate.

if you find ones that meets this criteria, you will have winners.


these are your big winners. the reason is simple: no tax loss selling in
January (selling pressure lifted) the shorts will cover because no taxes til
April of 2010.

I have been doing this since 1972.

Eyeing a Ferocious Snap Back in Small Caps

The "january effect" is going to be huge in 2009.

start buying micro caps now.

SWHC, TSTR, ALVR, ENG