Tax Loss Selling

On December 16, I wrote in a column titled: “Seasonal Market Influences“:

“From early November until about December 23 investors tend to get rid of losing stocks for tax purposes. Reports indicate that this effect drives down many prices to 52 week lows and that these stocks selling at their lows around mid December usually outperform the markets through January and February.”

I have attached charts of two companies that may meet the criteria of “tax loss” candidates and that we should monitor to see if they continue to drift lower till year end and then rebound after Christmas and through January.

1. Allon Therapeutics Inc., Ticker Symbol NPC on the TSX has traded from January of this year in a narrow range between $0.35 and $0.65, until mid to late October when it broke down to under $0.25 just a week ago. This certainly appears to have suffered from year end selling and If so, I look for it to trade back up to the $.35 to $0.45 levels in January.

2. Hanwei Energy Services Corp: Ticker symbol: HE on the TSX has traded in a $0.08 to $0.20 range from January till mid October and has slowly traded down to $0.50 on December 15, just two days ago. It may have seen the last of the tax loss selling pressure and has already jumped up to $0.50 in the last two days.

Devoting your attention in mid October and early November to stocks that have performed poorly throughout the year could prove beneficial. Follow them to determine if they are now subject to additional tax loss selling pressure. If they have sold off further consider buying between December 1 through December 23. Often these stocks will start to rebound from tax loss selling pressure as early as the week between Christmas and the New Year and continue throughout January.

I will re-visit “NPC” and “HE” in a month and report on their performances..