|
|
 |
 |
 |
|
| Home | News | Commentary | Forum | The Loft | Online Activist | State News | Resources | Cartoons | Classifieds | Contact Us |
Top Shelf Stocks In a market where confidence is low and volatility is high, the stocks you choose to trade will make all of the difference. By narrowing your trades down to the best of the best, you will protect your downside and increase your profit potential. Let's look at some of the financial stocks and explore how Stock Darwinism works. The collapse of the sub-prime market and accompanying crisis of confidence has taken its toll on the financial stocks. Specifically, Bear Sterns has suffered the most dramatic fall from grace with shares toppling from $150 to $10. Some analysts have suggested that these are just melodramatic downturns and that it's time to start the rebound, e.g. the recession is half over and now is the time to buy. Others believe the worst is yet to come and we're in for a big drop. So what is the Average Joe supposed to do? If you stay out of the stock market now, you might regret having passed up a potential financial windfall by not taking advantage of dirt cheap stock prices. If you jump in with no regard for your hard earned money, you could find that what you thought was a buying opportunity was actually a last gasp for a falling market. So which is it? When in doubt, why not rely on one of the oldest and most respected of theories, Darwinism? Darwinism in the stock market means picking the strongest stocks and weeding out the weakest. If we're in for a big drop, you want to be in the strongest stocks because they will survive. If we're in for a huge rally, you want to be in the strongest stocks because they'll climb the most. The next question is obviously, "So how do I determine what's strong and what's weak?" To determine a stock's relative strength, you need to combine technical and fundamental analyses. From a technical aspect, if every time the market moves down, the stock moves down in kind, then it's not really showing any strength. If selling pressure is heavy and the stock begins to rise on air (light volume), it's probably a stock to avoid because there is no support. Fundamentally, if the stock you are watching is in limbo, opt to choose a stock that is more supported. For example, list all of the reasons that caused Bear Sterns to falter and see who else has the same ingredients for a disaster. They don't require the same amount of each component, but just knowing that they exist, subjects them to certain risks. Who has some of the Bear Sterns' ingredients? Lehman (LEH) and Citigroup (C) are some candidates of note. They will pop when the market goes up but they'll probably fall harder and faster than more stable stocks. Stocks like Goldman Sachs (GS) and JPMorgan Chase (JPM) are amongst the elite of the industry. Sticking with our Darwinism approach, these stocks will reach new heights every time we rally and also remain firmer in the face of major market downturns. They won't be unaffected, but they will allow you to survive, and in the stock market staying in the game is a big part of succeeding. If you stick with the "top shelf" stocks, you are giving yourself the best chance to succeed. You want to be around to take advantage of the good times and believe me, there will always be good times. So when you are deciding which stock to buy, always reach for the top shelf. --- Adam Mesh has been a trader for over ten years. His trading success has been featured in Fortune Magazine numerous times, Trader Monthly, and he has also appeared as a guest on CNBC's Squawk Box. -------------------- Note -- The opinions expressed in this column are those of the author and do not necessarily reflect the opinions, views, and/or philosophy of GOPUSA.
Current rating:
|
|
3.0 out of 5.0 (2 total votes)
|
|
|
|
| |||
 | |||
| |||
|
