Think fast; which stock in the information technology sector of the S&P 500 Index was the top performer over the first 10 weeks of 2019?

Do you think it might be Netflix (NSDQ: NFLX)? Despite its impressive 33% rise, Netflix wasn’t even close. For that matter, neither were Microsoft (NSDQ: MSFT) at +12% nor Apple’s (NSDQ: AAPL) at 15%.

Believe it or not, seemingly stodgy “old tech” copier company Xerox (NYSE: XRX) led the way with a 57% total return from January 1 through March 12.

Admittedly, that number is somewhat misleading since Xerox fell sharply in December. On the last day of November, XRX traded above $27. One month later, its share price had fallen below $20.

Consequently, a little reversion to the mean seemed in order. However, a quick peek at Xerox’s long-term stock chart suggests there was more at work than random volatility.

Falling Through the Floor

Last week, my colleague Scott Chan explained “Using Ceiling and Floor for Profitable Trades” as a way to beat the market. As Scott put it, “It isn’t until some catalyst attracts strong enough demand that the stock breaks through resistance—and holds—that the stock soars to new heights.”

Now, take a look at this chart of Xerox stock since we added it to the Personal Finance Growth Portfolio three years ago:

The first small bubble on the left shows how XRX fell until it found support, or a floor, near $21. The second small bubble illustrates how XRX rallied sharply six months later until hitting resistance, or a ceiling, near $27.

Over the next two years, XRX never closed higher than $33 or lower than $21 until three months ago. In December, Xerox broke through its floor price as the entire stock market hit the skids.

There was no news specific to Xerox to explain the sudden drop three months ago. So, I concluded that XRX was trading almost entirely on sentiment and not logic.

For that reason, I included Xerox in a list of value stocks that had become grossly oversold (“Crunching the Numbers”) and likely to recover strongly this year.

Cracking the Ceiling

As I noted in that article, what empirical evidence we did have regarding Xerox was mostly positive. Its Q4 and year-end results came in better than expected, prompting the company to raise guidance for this year. In addition, the board approved a $300 million stock repurchase plan.

Now, take another look at the stock chart above. That big circle to the right is what happened when the stock market finally took a more rational view of Xerox.

Just as XRX had broken through its floor on the way down, it busted through its long term average price of $27 on the way back up and is bumping up against its ceiling price of $33 this week.

I believe XRX will soon break through its ceiling and trade up into the mid to upper $30s. At a share price of $33, Xerox is valued at only eight times forward earnings and less than one times annual sales. Both of those metrics are about half the multiples for the S&P 500.

Bubbling Up to the Surface

Until very recently, the stock market hasn’t shown much interest in value stocks. It preferred high-multiple momentum stocks that could grow top-line revenue irrespective of profitability.

That appears to be changing, as evidenced by the big turnaround in Xerox and other low-multiple value stocks. If you look at their charts carefully, you may be able to spot a few that are about to “bust the bubble” and make a big move to the upside.

Since adding Xerox to the PF portfolio three years ago, it has delivered a total return of 29%. That’s pretty good in absolute terms, but I know we could have done a lot better.

It makes me sick to think of how money could have been made by simply buying call options on Xerox three months ago while its share price hovered around $20. Instead of earning a 57% gain in the stock, some of those options have already appreciated by several hundred percent!

That’s not my area of expertise, but it is for my colleague Jim Fink, chief investment strategist of the premier trading services Options for Income and Velocity Trader. Jim has a time-proven ability to pinpoint hidden buying opportunities that pay off big.

Jim has developed a proprietary trading system that consistently crushes the market. His followers already are using his system to amass wealth.

Concerned about market volatility? Jim wants to show you how to make 163% profits whether the market is going up, down or sideways. Click here now for a free presentation.