Many investors have a bad habit of only looking for stocks that are currently moving up, but this kind of trading tactic can severely limit you in the long-run.
Only keeping an eye out for rising share values essentially blinds you from other potential profits in the market.
Take Tesaro Inc. (TSRO) for example…
This particular company’s stock dropped lower and lower for about a year and a half straight, before skyrocketing 185% in just 12 days of trading!
Here’s some insight as to why this happened and how YOU can take advantage of another one of these increases the next time around.
Around mid-June of 2017, TSRO entered a vicious downtrend that would last until this past December. Prices fell from $150 and change to as low as $23.41 a share!
No, this was NOT a good time to be invested in Tesaro (unless of course you were shorting the market, but that’s a can of worms we won’t open up today).
Not only were stock values well below the 40-week moving average, but this moving average was angled downward as well. Two common bearish signals.
So, how exactly did TSRO manage to turn this around?
To fully understand how this all happened, let’s look back a few years on the chart below…
During the tail-end of 2015, Tesaro values dipped below the 40-week moving average, which is represented by the red line.
From then on out, shares made several efforts to break back above this moving average, but did not succeed.
Then halfway through 2016, Tesaro’s stock finally jumped above this red line just as it was starting to turn up, producing a massive 132% gain in a matter of hours!
Now, fast-forward a year after this profit took place and you’ll notice history starting to repeat itself…
As I mentioned, TSRO fell once again until share prices met up with the 40-week moving average, which resulted in a 185% climb between November 16th and December 3rd!
An increase that would’ve almost TRIPLED your original buy-in.
This just goes to show that you should never solely focus on “healthy” stocks, considering some of the biggest payouts tend to come right after a severe downtrend.
Just remember to be on the lookout for stocks that are about to clash with the 40-week moving average as it’s beginning to transition upward.
It’s no guarantee, but there’s a good chance that the company’s stock is on the verge of an increase.
