For me, navigating the stock market is all about finding good stock picks. Once I find a good pick, I don't just buy it and then sit and wait to be proven correct. I aggressive trade the volatility that is inevitable since I am confident that good fundamentals will continue to provide some form of support even when the overall market might be struggling.
I have a number of key stocks that I repeatedly trade as they drift around. A few that I've mentioned here many times are Alto Ingredients (ALTO) , Aurinia Pharmaceuticals (AUPH) , Xeris Pharmaceuticals (XERS) , and Big 5 Sporting Good (BGFV) . I've traded all these names dozens of times as they drift down on lower volume and then jump back up periodically for a variety of reasons.
What makes this sort of trading possible is that I'm confident that the valuations are quite attractive, and sooner or later, the market will recognize that and bring the price up. A good example is Alto Ingredients, which has reinvented itself as a specialty maker of high-quality ethanol used for hand sanitizers, alcoholic beverages, etc. It is currently expected to increase EPS from $0.30 in 2020 to $1.19 in 2021. That is EPS growth of nearly 300%, yet the PE on forward earnings is just six.
Those estimates can always shift, and there are a number of potential obstacles, but those numbers and the story have turned ALTO into an ATM for me. I constantly buy the fade and then sell into strength. At some point I expect that it will continue to run higher, but I'll keep a core position and be ready. I've been adding to the position this morning even though there isn't much support down to $6.50 or so which is the 50-day simple moving average.
Other names like XERS and AUPH are similar. Traders became bored with them when there is a lack of news and forgot about the longer-term prospects. I'll look to buy on weakness and then reduce the position into strength. The timing isn't always easy, and there is a risk they could go lower. But if you follow certain stocks closely, then you learn their personality and can trade them repeatedly.
We see some acceleration in profit taking, as I write. Breadth is fading, and there is some pressure to lock in gains. Plenty of stocks need some rest, and we may finally be due but watch for rotation to pick up as this plays out.