The Short Term Trader and Where to Trade in Tomorrow?s Market
As we enter 2009 the United States and other world economies are a mess. Governments are bailing out banks and other financial institutions, auto companies, and other entities deemed critical to national welfare. One sector not being bailed out is basic consumer goods. These companies are not in trouble and are mostly still making money. People buy hand soap, toilet paper, and laundry detergent in good times and bad. However, despite the fact that these companies are in good shape the markets are chaotic. People are selling solid stocks such as Proctor and Gamble to cover debts. This fact gives the short term trader an opportunity to make a profit?from the fluctuations in companies whose stocks normally do not fluctuate much. There will be profits to be made as sellers get out of basic consumer goods stocks, as other buy basic consumer goods stocks, and when investors believe that the recession is halfway?over and start selling basic consumer goods stocks again.
Where the Action Will Be and Where the Profit Will Be
There is a lot of chaos in the world of the short term trader these days. The short term trader who is able to anticipate the moves of the market will win. As governmental agencies promise another infusion of capital into another failed section of the economy, the market will jump up and down. The short term trader who sticks to a system and does not succumb to doubt and fear will stand a chance of making a profit.
Typical recession investment advice is to flee to banks and basic consumer goods. Banks are off that list for this recession. However, everyone needs toothpaste, toilet paper, and razor blades. The short term trader will be well served to think in terms of the long term investor. The strong sectors during this recession may be less chaotic but that means, perhaps, more predictable. If one sticks to a system and limits trading to sectors where there is more stability, then the potential for repeated measured profit may well rise.
The Short Term Trader and Basic Consumer Goods
Companies such as Proctor and Gamble?tend to?do perfectly well during a recession. People always need and buy basic consumer items. Because this sort of company exploits all of the niches of its markets the short term trader may find repeated opportunity for profit, mostly on the up-side. However, three general opportunities exist for the short term trader in basic consumer goods stocks.
- Basic Consumer Goods -?Selling Opportunities for the Short Term TraderCredit is bad, as everyone knows. Individuals with basic consumer goods stocks will be selling to cover debts and raise capital. This affords the short term trader the opportunity to anticipate drops in stock prices and win by shorting the stocks.
- Basic Consumer Goods -?Buying Opportunities for the Short Term TraderDuring the?recession those who still have capital will look for secure investments to weather the storm. Those investors will come to basic consumer goods stocks for?their stability and dividend potential. Buying will raise stock prices, giving the short term trader the opportunity to buy on the upswing and sell at the top.
- Selling Opportunity for the Short Term TraderWhen investors start to believe that the recession is halfway over they will start to sell their conservative stocks such as basic consumer goods to cash in on the recovery?of other sectors. This will briefly depress stock prices, giving the short term trader the chance to short these stocks and make a profit.
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