Buying the daily oversold

One of the ways to make money as a trader is to buy companies that have been oversold on the day. Basically this means buying something on a heavy sell-off and selling later in the day when the share price has recovered.

A very good example of this was the trading in Lynas Corporation (LYC) yesterday. News came out of funding trouble on their rare earths project. The stock was heavily sold off on the announcement and dropped to 10.5c (from a previous close of of 26.5c). It quickly rallied back to 20c.

Buying around the low of 10.5c could have provided a profit of more than 90% in the space of an hour or so. There are not many ways of making such a huge profit in such a small amount of time.

Usually I recommend to sell on the same day as the buy (i.e. not hold overnight). LYC closed yesterday at 16c. It is currently trading at 15c.