How to Cash in on Short-Term Swings
August 27th, 2007
How to Cash in on Short-Term Swings
The market is not a one-way affair. This is true not only of the market as a whole, but of individual issues. That is not to say that what goes up will inevitably go down; quite a few stocks have registered one new high after another without much interruption.
For the overwhelming majority of stocks, however, the opportunities provided by market swings are too frequent to pass up. The difference between the high and the low even in short-term swings often equals or exceeds a year’s growth.
The opportunities are even greater if you know how to capital-in on what I call “market disorder,” which is created by unusually sharp setbacks. When the market suffers a series of severe reversals, as when it breaks through a psychologically important support zone like the 600, as measured by Dow-Jones Industrial Average, people often get panicky and sell indiscriminately. This creates excellent opportunities to buy favored issues or switch into them from issues you want to get rid of. Though it may entail a small loss, plus brokers’ commissions, good stocks bounce back fast during a market rally which would more than cover the loss suffered in the wrong situation.