Early weakness on Tuesday morning gave dip buyers the opportunity to position themselves in front of some expected seasonal strength. It is well known that the days surrounding the Thanksgiving holiday have a very positive track record and traders have a tendency to make it a self-fulfilling prophecy when the right conditions are in place.
Weakness on Monday and Tuesday is a good technical setup for strength on Wednesday and Friday, and we are seeing some signs of positioning. Breadth was negative on Monday, but it has improved today and is now running about 2 to 1 positive.
There still are very limited pockets of momentum, with just a dozen or so names moving more than 10%, but the tone of the action is improving, and it appears that traders are going to try to front-run some holiday action.
It is very important to keep in mind that this is short-term trading action and not a major market inflection point. Be clear about time frames, and don't let a failed trade turn into a long-term investment.
One of my favorite short-term trading vehicles is Direxion Daily S&P Biotech Bull 3X ETF (LABU) . This leverage ETF has substantial volatility but also substantial liquidity. It trades about 60 million shares per day and can move very fast. It is a convenient vehicle for trading short-term market movement.
I'm also looking at stocks that are very illiquid and trade on light volume. These stocks can be very mispriced and can offer some good values, but they can be very risky as well.
One name I am adding today is Sensus Healthcare (SRTS) which develops medical devices for the treatment of skin cancer, keloids, and hair loss. It was hit hard on earnings, but there have been no major changes to its prospects. It is still estimated to earn $0.87 in 2023. It has had three strong "buy" ratings in the last month, with an average price target of $17.50.
Traders look like there are optimistic about some holiday trading, but I expected to see some volatility to shake out weak hands.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider SRTS to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)