...In particular tax selling usually hammers microcaps more than higher listed stocks.
This is especially true of microcap stocks that are sitting at a loss or are completely underwater in investor portfolios that had gains, which offset with losses. Even though these stocks to be liquidated have small size bids at this time of year that doesn't matter, in fact, hitting a weak bid and destroying a market allows the seller to both lock in the needed loss and reduce the amount of different stocks to sell off.
One person's loss becomes another person's eventual gain. After all, isn't buying at the right time simply buying as near the lowest price possible or available. Putting up a bid on what you want to buy at least gives you a chance to own the stock if the seller hits the bid. In other words, the seller has to go through your bid to lock in a sell.
Keep an eye on your bid because relentless sellers know no bottom so long as they get printed, which means you can keep buying lower. Normally, stocks that have had big swings tend to catch investors targeting those same stocks for sale if bought near a high price buy. This is perhaps the only time of the year where cost averaging down can save your portfolio.
Naturally, use your best judgment but once tax selling season is over prepare for fourth quarter earnings reports and buyers to come back in.
Tax selling season is also a time short players are swimming around trying to cover and lock in profits rather than putting out added shorts. Shorts are smart investors - why not be in the same pool doing the same thing as the shorts.
It is amazing to me that no matter how good or bad any year is in the market, tax selling repeats itself like spawning salmon, in the same waters in the same cycle of the markets.
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