Small-cap stocks, and penny stocks, appear to be BACK.

As I have recently mentioned to my members, this might have something to do with the impressive bounce seen in the markets lately.

I mean, on the week so far, the SPY is up 5.53% and up over thirty points from the most recent low.

The recent strength in the market seems to have resulted in an increase in volume and opportunities in specific small-cap stocks.

Experience, screen time, and knowledge pay off more often than not.

Sometimes, I will have a stock on my watch list and alert my members to a potential setup that may not seem too obvious or attractive at first glance.

This is where experience and screen time come into play.

A recent stock from my watch list, and one which I have spoken to my members about since the end of January, is a fine example of just that.

Epizyme (EPZM)

When this stock and idea first hit my watch list, I imagine that some of my members might have looked past this idea because the daily chart was not as attractive or obvious as my other ideas.

It was an idea that might have been quickly passed up in that sense.

However, my experience allowed me to understand better what was going on with the stock and, therefore, the stock’s potential opportunity.

Allow me to explain.

Recent News:

On the 27th of January, EPZM announced a 56,666,667 share offering at $1.50. They are expecting the offering to gross about $85 million. The stock closed the week down 48%.

The offering resulted in a significant gap down.

After the offering, I told my members in my Trade Plans that I was monitoring the stock closely and that it “is now on my bounce watch for a possible return to $1.25 to $1.30 range.”

Why was the stock on my Watch List?

With an offering and significant gap lower, coupled with lower highs and lower lows, you might be wondering why I had this stock on my watch list.

Well, several factors came into play here.

First of all, I understood the nature of the offering, and I firmly believed that after the significant gap down in the stock, on the first sign of support being found, it could experience a bounce.

I also noticed that there had been some insider buying lately by a company director, which is, of course, a potentially bullish signal.

If you would like to glance at the history of insider transactions for the company, hit the link above and scroll to the bottom of the web page.

So, because I understood what the offering meant for the company and noticed that a director had recently purchased shares, I placed the stock on my watch list for a potential bounce trade.

Here was my exact plan, on January 31st, from my watch list, which my members have access to:

The stock never took out the low from the gap down, my stop area. On days 1 and 2, my conservative target area acted as resistance as the stock failed to break above this level.

On day 3, however, the stock broke above this level and turned it into support, and traded towards my ambitious target area of $1.50.

The Bottom Line

If I can summarize this idea and the reason behind my correct call, gang, it would be that it pays to go the extra mile when it comes to preparation.

Because, after all, “luck is when preparation meets opportunity.”