For many years I have heard the case between a technical trader and a fundamental trader. Both styles have strong points and weak points. The pundits agree that a larger majority of technical traders miss most of the move and only benefit from a portion of the move.
Now, I would like to point out from the technical trader's perspective, that the recent gigantic fall, the technical trader missed that portion as well.
Investing and trading stocks in our current market is going to take a combination of both styles to be successful. Combining the two with a dose of logic will separate the winners form the losers.
Fundamental Trading
A true recession occurs when supply overwhelms demand. Companies fill their warehouses with products and start laying off people. A chain reaction occurs and the economy stagnates.
Recently we encountered a different kind of economy litmus test with the banking system. The simply gave loans to anyone who had a job. For years it propelled our economy to record highs. But as more and more people defaulted upon their loans, the banking system was exposed and failed.
The recent huge pullback is going to present some nice buys in with the stronger stocks. However, it will be advised to use a short term approach to buying and selling.
The trend is bearish and unless you can short the more likely candidates, a short term approach can be the key to success in this kind of market.
It will be counter trend trading, but traders with the right mindset can make some real nice trades.
If a company such as Apple computer is not laying off and sells remain strong we have a good setup on a pullback to reap some rewards. The stock itself may remain bearish until all the weak players have been shaken out.
Once the longer term players come back into play the stock will gain stability and make a base. Once we see it start to make higher highs again we will be able to modify our approach to a longer term style of trading.
Every Bear Market Has a Bull
This is not hard to figure out. There are two areas I am looking at:
Alternative Fuels and New Technology.
Looking over the technology sites and keeping up with what the future is shaping into is a good way to beat the crowd to the next big thing. The next big thing shaping up now is 3D technology. Gaming and security issues should impact this area with great distention. In the future our monitors will be in 360 degree 3D.
Alternative fuels may not come as a surprise. Wind and solar energy should lead this sector. America and the rest of the world have been shown the door on what happens with OPEC.
Our new president elect, Obama has pledged to support this avenue of energy independence. Alternative energy is now a matter of course our country will take not only due to the recent energy prices but also as an environmentally necessity to secure the future of our children's children.
Dividends
Stocks that pay a dividend have taken a hit in the price per share (PPS) just as all stocks have. The longer term approach in these stocks could very well pay dividends down the road when the PPS goes up.
Starting a diversified account now and slowly adding the dips may very well be the blessing in disguise in this market. Turning these dividends over and over compounding them will be a great way to build a nest egg.
Conclusion
It's also time to consider an old saying in the stock market, "when no one else wants to buy, its time to buy."
Author Resource:-
G.Witt from Stock Market Cats and Bicycle Motor Forum has written numerous articles about stock market and forex trading that have been published on the Internet.
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