The key to a good oversold bounce is that early strength holds and long enough for some fear of missing out to develop. If there is immediate selling into strength, then there is little concern about the market running away to the upside, but if the sellers can't gain traction, then buyers gain confidence fast and start to chase.
Breadth was running around 4 to 1 positive so far Tuesday morning, and there are 30 new highs to just 180 new 12-month lows. ARK Innovation ETF (ARKK) has 34 gainers to zero decliners, and the Nasdaq 100 ETF (QQQ) was 97 gainers to just four decliners.
Breadth has been very strong in both directions recently, mainly because this action is index-driven rather than stock-picking-driven right now. Market participants just want to be long or short, and they are more likely to use the index ETF as a vehicle rather than bother with trying to pick stocks.
When the market returns to health, we will start to see more focus on finding individual stocks with superior fundamentals, but it is too early for that right now.
The most important issue right now is to be very clear about time frames. This is clearly just an oversold bounce, and it can fizzle out very quickly. The easiest mistake to make is to load up on stocks that you like long-term and then get stuck when the market continues to go through corrective action.
There are plenty of pundits preaching that you have to take advantage of low prices while you can. They almost always err on the side of being too early because they are focused on trying to catch a bottom rather than buying sustained momentum.
I see a number of stocks that I like long-term that are acting well today. Eastman Kodak (KODK) , Kohl's (KSS) , Lantheus Holdings (LNTH) , Sensus Healthcare (SRTS) , and BELLUS Health (BLU) are a few examples.
Humacyte (HUMA) , which is developing artificial blood vessels, is a pre-revenue name that I think has great promise, but in the current market environment, there is no need to build positions aggressively. It is one that I will look to take advantage of on weakness. Insiders recently bought around $4.83. The stock was recently at $3.77, which illustrates how even management can't time the exact low very well.
(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.)
