Like the old Atari game "Pitfall", this market is full of traps that investors can easily fall into. With the S&P 500 and Dow Jones Industrial Average recently falling from all-time highs, volatility can lure investors into traps. In this article I've identified three ways that the market can trick you into losing money.
1) Blindly Buying Dips
It may sound easy enough to jump in and buy a stock on a pullback in this market. After all, the practice has worked very well during the stock market's run off the lows of March 2009. However, as we reach higher highs, the market is likely to become more discriminatory. That is, sector selection and individual stock selection will become increasingly important.
Buying a stock just because it pulled back could prove to be quite dangerous. When buying on a pullback, it's important to make sure there has not been a change in its long-term trend. The pullback could mark the end of a trend and not just a retreat to a support level, especially in the short-term. Always remember: "The trend is your friend, until it ends."
2) Chasing Winners
While buying that hot cloud-based technology stock or electric car company may sound like a great idea, it's also a great way to lose money. We've all heard the old adage: "Past performance is no guarantee of future results" and it couldn't be truer when it comes to individual stocks.
More . . .
------------------------------------------------------------------------------------------------------
Time to Buy Rare Momentum Stocks
The recent correction has made momentum stocks harder to find, but it has also fired up a precious handful with extraordinary growth potential. We found these exciting companies with an enhanced, market-beating Zacks Rank formula:
Strongest Fundamental Indicator
+ Pinpoint Technical Analysis
= Momentum Trades with Extreme Upside
Don't miss the strategy's 6 live picks plus a 7th I'm adding Monday. Your special opportunity expires Sunday, September 13.
See the trades right now >>
------------------------------------------------------------------------------------------------------
The stock market is always looking forward to the next quarter's and the next year's results. Earnings stories that were great in Q1 could quickly reverse as Q2 results and guidance are announced. Make sure you investigate these earnings pictures and outlooks before you jump onto last quarter's winners. Luckily for you, the Zacks Rank system is here to help you identify which of these stocks are in the best positions to continue higher.