Which stocks were part of the run up this year and which ones are playing catch up? A recent example is Proctor and Gamble which has lagged the market. It is an increasingly conservative world where stocks are often ignored and treasury bills pounced on. A stalwart and current catch up stock such as P&G would seem to be a logical place for the conservative investor to park his or her money. So, when will folks ?find? P&G again? When will the stock move and when can a wise trader make some money? Trading catch up stocks that offer a secure investment during and after economic recovery may be a wise choice for the wise trader.
The stock market looks to be headed for many years of doldrums. Thus the trader will likely do substantially better than any long term investor as the trader profits from both the ups and the downs of the stock market. However, as we have often noted, putting yourself in the shoes of the long term investor will help you anticipate stock market moves. Being there when the action happens is an integral part of any success trading plan.
Whether you plan to buy and sell options in advance of a market move or wait for movement and scalp you way to a nice profit, having an idea of where the stock market may go before hand is important.
As the stock market started its rally earlier this year we talked about long straddles, namely buying both a put and a call on a given stock so that one is guaranteed a profit no matter which way a stock moves up or down. The only way the long straddle loses money is when the stock does not move.
As the stock market started moving up we were betting on a big gain and protecting against a loss. Now, with a note of uncertainty in the fall market one might well be betting on a stock to loose value and, and the same time, protect against an unexpected rally.
The point of a long straddle is that you are betting on stock market volatility, not stagnation. The advantage of using a long straddle is that you do not have to be at your trading station the moment the market moves to make a profit. You can sell your options and make a profit after the fact.
Scalping requires that you be there when the action happens. With good trading volume and a large stock market move you can buy or sell in portions, riding the market moves and corrections and making a profit in each direction.
The point about looking for catch ups in the stock market is that companies like Proctor and Gamble are well run and habitually make money. They are also huge so that a great new product will only make a small percentage difference in their profit, or loss. But, if conservative investing becomes more and more the norm then companies like P&G will possibly see surges in their stock prices. Doing a little homework, picking the stocks to watch in the stock market and getting ready with your trading strategy can make the difference between a lukewarm and a hot year at your trading station.
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