Bottom Pickers Heaven

  • SumoMe

For openers I should point out that there are alternative names for “Bottom Pickers Heaven.”  The most common one is “Suckers Hell”.  In any event, I am pretty sure that “Bottom Pickers Heaven” is located on “Do You Feel Lucky Punk Avenue”.  But let’s not worry about all of that right now.

For now, welcome to the New Normal, which can be pretty well summed up as follows: Stocks go up, everything else goes down.

To wit, the microcap ETF ticker EWC has been up 26 of the last 28 trading days.  I am going to be brutally candid here: I have no idea what this means going forward.  Now onto our original topic.

Attempting to “pick bottoms” in the financial markets is often referred to as attempting to “catch a falling safe” or “catch a falling knife”, take your pick.  And there is good reason for this.  The desire to be a “hero” and to “maximize profit” and to buy as closely as possible to an actual bottom in price – well, in the immortal words of the late, great Glenn Frey – “it’s got a very strong appeal.”

Unfortunately, like trying to catch a falling safe, it’s a great trick when it works, but comes with certain inherent risks.  Does this mean you should never, ever attempt to pick a bottom? Not necessarily.  What it does mean is that “bottom picking” should fit firmly in the “Speculation with a very small percentage of your capital with an understanding that a great many of these attempts will fail spectacularly so you’d better have some kind of risk controls in place” portion of your overall portfolio.

Lastly, known of the securities highlighted below are “recommended” only “highlighted”.

Ticker UNG

Natural gas has been in a serious downtrend June 2008 when the fracking boom got going. Is that decline about to end? Probably not.  But as highlighted here we are in a (potentially) seasonally favorable period for natural gas and with UNG trading at $6.31 the “low to beat” is $5.78.1Figure 1 – Ticker UNG (Courtesy AIQ TradingExpert)

Ticker SGG

Like UNG, physical commodities of all stripes have been pretty much a disaster since 2008.  Sugar – as tracked by ETF ticker SGG – has declined roughly -72% since August 2011.  Does this mean it is about to rally?  Not necessarily.  But SGG appears to be attempting to form some sort of a short-term multiple bottom in the $26.50 area, with a “low to beat” of $24.97 established back in August of 2015.2Figure 2 – Ticker SGG (Courtesy AIQ TradingExpert)

Ticker SWN

The energy market in general has taken it on the chin since about June of 2014 with an attempt to rally in 2016 followed by more weakness in 2017.  Ticker SWN stands as a classic “bombed out” stock.  After a roughly 90% decline since its peak in 2010, SWN has formed (at least for now, he said ominously) a double bottom at $5 a share.  Will that low hold?  It beats me.  But if you’re wearing your “bottom pickers heaven” sunglasses, that means you think the sun is shining (For what its worth, SWN reported a 17% rise in revenues in the last quarter.  Does that mean anything?  I guess we will find out).3Figure 3 – Ticker SWN (Courtesy AIQ TradingExpert)

Summary

Please DO NOT go out and buy any of these securities based solely on what I have written here.

Let’s face facts:

Fact #1. Bottom picking has an allure

Fact #2. Bottom picking fails way more often than it succeeds

Fact #3. I have no strong feelings regarding the securities highlighted above one way or the other.

With all these “facts” in mind, the bottom line is that these securities are at the very least “attempting” to form a bottom.  Should you choose to examine these more closely or simply to run or the hills is entirely up to you.

If you do choose to look more closely remember to put on your “high risk speculation” hard hat.  It could come in handy.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

 

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