Source: Penny Stock Detectives

Turnaround Trades to Buy Low/Sell High in This Market

Companies making new 52-week lows on the stock market are very attractive in this market (if you don’t already own them!). The reason for this is that this market has the liquidity and the institutional interest to pounce on good news, or should I say, better-than-expected news. Event-driven trades are plentiful in this market, and the “buy low/sell high” investment strategy is working with micro-caps.

In this market, I’m not particularly in favor of taking on new positions in the stock market, specifically with large-cap companies that pay dividends. I think investors should wait until the next stock market correction is considering new positions. For risk-capital speculators, however, this is a market where the goal to buy low/sell high can be achieved. This market is not expensively priced, and you can even trade positions, making recent new lows.

One such example is DragonWave Inc. (NASDAQ/DRWI), which is a micro-cap stock just bouncing off its 52-week low. This company sells microwave products for Internet Protocol (IP) networks, with customers in the telecom, utility, and enterprise markets. The business has struggled over the last few years, and the stock was trading over $12.00 a share back in 2010. Recently, however, the company reported quarterly numbers that pleased investors, and the position jumped on the stock market.

DragonWave’s stock chart is below:

Chart courtesy of www.StockCharts.com

DragonWave isn’t making any money, but it has a lot of cash in the bank considering its size (well over $1.00 a share). I’d say this stock is worth keeping an eye on for buy low/sell high speculators. It might have more legs after its quarterly numbers bounce, and could be a candidate for a buy low/sell high trade.

The buy low/sell high investment strategy takes courage, and you have to be looking throughout the stock market for those positions that are down and out. As I say, in the small- and micro-cap sectors, I like the buy low/sell high strategy for risk-capital traders. For larger-cap investing in a slow growth environment, I’d rather buy existing stock market winners that experience a price correction.

Horizon Pharma, Inc. (NASDAQ/HZNP) is another small company on the stock market operating in the biotechnology sector that is trading close to its 52-week low. The company just completed a major share and warrant offering, and one company director just made a material insider buy. Horizon’s stock chart is below:

Chart courtesy of www.StockCharts.com

Waiting for the right circumstances is how the buy low/sell high investment strategy works best. When a company’s share price is down on the stock market, there’s a reason. In this market, event trades are working and you can piggyback upward swings in the hope of continued price momentum. To buy low/sell high, you need a good company with a product or service that people need, and the share price of which is in the doldrums. They can be tough to find in the stock market, but they are out there.