1. A stocks needs to lose most if not all of its sponsorship to form a true bottom
-when everyone has downgraded a stock and it still has a decent balance sheet, your downsize is limited
2. Bad news hits and the stock cease to go down
-bottoms get formed only when all of the sellers have finished, so there is no one left who cares about the new negatives to want to dump the stocks
3. Large insider buying
-management buy shares for one reason: to make money
-make sure it is large insider buying, small amounts of buying from management could be used as a tool to deceive investors to make it look like the company is attractive
4. A stock is rumored upon negatively and nothing happens
-negative rumors usually start with large hedge funds which are trying to cover their shorts; this is used in desperation because they know that the stock is more than likely going to go up unless they can do something about it
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