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Struggling Stocks - How Do You React?

On Wall Street, the old saying that “no news is good news” does not seem to hold true with struggling stocks. During the first week of November, 2006, the stock market struggled amid subdued trading as traders waited for indicators on the overall health of the US economy. Although oil prices fell and Boeing Co. was a stock market mover with its huge military contract victory, there was very little to talk about as stocks struggled.

Although the stock market news of the Democratic victory in the mid-term elections did spur a sell-off, stocks struggled as experts and analysts attempted to predict the changes in store as the Republicans lost power. This shift in the balance of power touched off concern about industries from health care and pharmaceuticals to energy and defense. Experts opined that while the news of falling oil prices was a positive, the markets seemed to be taking a rest in the absence of an announcement or event that could provide a boast. Finding a successful trade when the stocks are struggling is the mark of truly knowing how to invest in stocks.

With the general end of the “earning season” for most companies, investors are looking for signs in the economy that indicate a general slowdown in the rate of inflation. The possibility of additional interest rate hikes continues to loom over the stock market and dampen the enthusiasm of positive news in the market. In these times, investors spend more time looking for hot stock market picks when, as a whole, stocks are struggling.

In times such as these when stocks struggle, traders require a strong stock trading plan. First, an investor needs a successful stock trading system such as Japanese Candlesticks. This provides the trader the ability to successfully analyze the markets. After understanding the movements in the market, the investor can implement trades expecting to make money. When stocks struggle and the market lacks volatility, the trader can look for companies to buy straddle options or buy strangle options. Such moves provide limited risk but unlimited profit potential. Other strategies include: selling covered calls, and buying or selling puts. Since the market is somewhat bearish during a period such as this, the strategies involved tend to have lower risk reward ratios. Although the market is struggling to find profit, that doesn’t mean that the successful trader must struggle. The key is for the investor to shift his, or her, thinking to a more conservative approach and look for opportunities that while offering lower returns, also offer lower risk.

Stock investing systems offer the trader a valuable way to perform technical analysis on companies and their stock to find trading patterns and be able to identify investment opportunities. In spite of the fact that stocks may be struggling, following a trading plan helps the investor to find the companies that are moving and implement trades. A trader cannot simply develop a plan and follow it. This plan should be living and changing as the market evolves. Struggling stocks should only cause an investor to adapt the trading plan, not to quit making money.

 

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