How to Select Winning Stocks in a Down Market

There is an old and true saying, "When the markets go down 75% of stocks go down.". This is the old saying is the glass half full or half empty. I see this statement to mean that 25% of all stocks will rise in down markets.

I never recommend going short on a stock. In a down market I recommend going to cash, buying puts, or if you must invest, buy stocks that will not cave in to the markets pressure. Easier said then done, but I will attempt it here.

Since the stock market is much like the ocean, it goes up and down. Sometimes the waves are strong and suck you under. To stay afloat you need a life preserver. The life preserver I use in the ocean of stocks is Sectors. There is always one sector that seems to move higher when everyone else is being sucked under. Currently (06/30/08) the hot sectors are Energy and Petroleum. The markets are down 14% for the year and these sectors are producing stocks that have gained 400% and more over the last few months.

To identify the hot sectors (you should be hearing about them in the news consistently) you can always look in the financial papers or online website also. Once you have located the hot sectors, look at all the stocks in those sector. Some will be leaders and some will be laggards. The leaders will be the biggest names in that industry/sector. If you look at their charts you will see a pattern of the stock moving consistently higher over the last 6 months or more. These usually make great long term investments during a down market.

Now if you are looking for some great short term profits over a weeks time or a month, here is what you do. Look in the same sectors but look at the laggards (usually the stocks in the $2 to $5 range). Look at their chart and find the ones that look like they have reached a bottom. You don't want to see a chart where the price is getting lower each day. You want to look for one that hit its low point and is either moving sideways or been rising the last week or so. Put these on a watch list. Watch these stocks for one that gains 10% or more in one day on BIG volume. This would make a great short term play.

The reason this works is all in the mentality of the investors. When a sector takes off, it's the leaders in that sector who gain the most. They lead the way. As more and more investors get in on the bandwagon, this sector and the leaders rise in price. Soon more people want to invest in this popular sector. When they look at the prices of the leaders they see three digit numbers. "That's too expensive" they think, but they don't want to be left out either so they buy the laggards. Now all these companies with horrible earnings start to take off. You want to jump in right when they take off. So keep an eye out for the 10% jump.

Here is a warning, like the housing bubble, like the tech bubble, the energy and petroleum sectors will someday pop too and it is the laggards that drop the most first. This is why I recommend them as short term investments only.

- By W. Henry Boyett

About The Author

W Henry Boyett retired from his job three years ago and now trade stocks and options for a living. He shares his picks and knowledge with others so that they too can retire sooner, by trading stocks and options.

To get his latest stock picks and tips, visit http://www.stocklocater.com and sign up for free

Stock Trading Terms You Must Be Familiar With

Every field of human endeavor have its own terminology that is associated with it, the stock market is no exemption. Therefore this article seeks to make you get familiar with some of the day-to-day terms of stock trading.

a. Share. Describes the total share holding of a company divided into bits or slices to be purchased by institutions or individuals.

b. Securities. The unit shares you hold are well protected to the extent you invested by the regulatory authorities. Once a share is created, it cannot be destroyed, stolen, and can only be transferred.

c. Equity. Means the distribution and sales of shares are equitably done i.e. once a price is fixed; it remains the same for everybody irrespective of where you live unlike property investment whose prices are affected by location.

d. Stocks. Describes the total volume of shares held by the individual in company.

e. Rally. Means simply that the stock market goes up from whatever point it stood at when the rally started.

f. Blue Chips. Describes solid, quality stocks on the stock exchange e.g. Nestle, First Bank, Cadbury, Nigerian Breweries, Zenith Bank. The term is derived from the blue chip used in gambling especially in poker, which has the highest value.

g. Correction. When the market has moved rapidly in one direction, then changes (usually not so rapidly) in the other direction.

h. Long pull. How high an investor thinks a stock price will go before they sell.

i. Pull back. When the price rise reaches its peak, slows and then stops and begin to decline or fall back, people begin to sell at this point.

j. Bottom out. When the price has gone as low as it can, investors begin to buy again.

k. Liquidity. When we talk about liquidity on a stock exchange, we are talking about how easily and quickly a company shares can be converted to cash. If it is very liquid, it means is easy to trade in the shares.

l. Bull trend. Upward move or trend. It means the market is going up and is doing well, as reflected in share prices.

n. Bullish. Investor who believes that the market prices are going to go up.

o. Bearish. Investor who believes that the market prices are going to go down.

p. Stag. Investor who wants to make profits from new issues of shares. He buys the shares before they are listed. Then sells them at a higher price soon after they are listed.

q. Automated Trading. Is when the buying and selling of shares is done on a computer? dealers enter buy and sell orders for shares into an electronic trading system on a computer. The computer automatically does a transaction with the best selling and buying prices.

r. Brokers Contract Note. The broker's contract note is very important. It shows everything about the deal that the stockbroker has done for you. It tells you how much you have to pay the stockbroker for the shares he has bought for you. If you have sold shares it tells you how much you will receive for the sale of your shares.

s. Certificate of Stockholding. Shows how many shares you own. It is a very important document. You must keep it safe place.

t. Capital Market. Refers to the Stock market, it is a platform for raising money or capital from the investing public to meet company's financial needs.

u. Money Market. Refers to Banks and other financial institutions that offer loans investment opportunities and capital for businesses



By Efetobor John

Watch out for other incisive and impact articles, in case you want to get other enriching articles go to: http://stocktradingrevolution.blogspot.com

John Efetobor is an Investment Communicator, Analyst, Motivational Speaker, Coach, Trainer, Human Developer, Investor and Businessman. He has a Stock Trading Revolution Blog where he writes informative articles on Stocks, stock trading and other Vital aspect of stock investment Visit: http://stocktradingrevolution.blogspot.com for more information.

How to Buy Good Value Stocks?

There is a common perception among the stock investors that their profits depend upon the number of shares they own irrespective of their value. A common investor, therefore, usually prefers to buy 1000 shares of $1 each to 50 shares of a stock at $20 each. This perception, according to experts, is wholly misconceived.

All other factors remaining the same, you return on your investment of $1,000 in this case will be the same irrespective of the number of shares you own.

You should always go for the stock of an established company with a consistent track record of good performance. This advice stands good especially for those investors who do not have any experience or understanding of the stock market or who do not have any idea of fundamental or technical analysis and so on. This is a kind of rule of thumb for investing.

Most popular companies have some thing about them, some indefinable qualities that marks them out from their competitors. This "something" factor' is unique to each company and it is indelibly etched in the mind of the public at large. This unique trait cannot be copied by their rivals. For example, look at Coca Cola, Wal-Mart, McDonald or Apple. The logo of Apple, for example, evokes a strange confidence that no other company in the same industry can. Such companies stand alone and no amount of competition can beat them. Quite possibly companies, like Coca Cola, have their own trade secrets which render them invincible.

These companies often stand by their investors and do not let them down even when the values of their stocks fall. Such companies even try to buy their own stock in order to maintain its value. There are other companies which pay good dividends to their investors regularly, the market value of their stock notwithstanding.

It must be interesting to note that some investors even sell their good value stocks and invest in these companies solely on the ground that they pay good dividends that substantially make up for the lower market value of their stocks. These companies have a loyal following of investors who are immune to the temptations of their competitors.

Learn about the management of the company you want to invest in
Companies flourish because of the honest policies of their managements. Great managements have honesty as their best policy. But how can an ordinary investor know that a company's management is honest? The best way is to study the history of the company since its inception.

If the management has ever made some mistake in conducting the affairs of the company some time, it would not hesitate in offering explanation, admitting it publicly and apologizing for it too. Good and honest managements not only apologize for their lapses, they also reasonably compensate their investors who suffer for those mistakes.

Buying good value stocks at cheaper rates

Sometimes companies with truly good track record face emergent financial situations and they are compelled to sell out their stocks at much reduced rates than their actual value. The market may be facing bear hug. Such situations, even though transient, may bring down the prices of their stocks. If you are lucky, you may even get such a high value stock even at 50% discount. A market savvy and vigilant investor can always lap up such opportunities.

Look for institutional investors

Institutional investors have their expert financial analysts. They keep a watch over the stock market in all its respects. Their level of specialized knowledge is not available even with the most experienced and well-informed individual investors. If you do not know any thing about investing in stock markets, the best course is to keep a watch over the institutional investors. Always buy the stocks of the companies that have institutional sponsorship.

General awareness

Internet is a great source of information but there are hundreds of websites giving confusing and contradictory information about stock investing. Devote sometime on two or three websites that provide reliable information. The next step is to try to find out the most lucrative financial or industrial sectors and the best managed companies in those sectors. Keep a track of their performance. Study their financial reports, their P/E ratios and do all kind of analysis on their performance. This way you can land on good stocks. Do not invest in just one stock. Diversify
your portfolio.

Sogotrade Interest Rates and Fees: trading stock options
- By Micheal James