There is no question that the risk environment today was
bad for stocks. The threat of war is the most serious source
of market disruptions and suffering. War on the Korean
peninsula would pull in the larger economies of China, Japan
and the US who would all be put in an intractable position by
escalating violence. It seems unlikely that what happened
today will go further but was more than enough to push a
broad-based decline in stocks back to support. In today's Ask
the Expert video we talked through the problems as well as
the opportunities of pull-backs like this.
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Small traders will often avoid buying at support because, by
its nature a support bounce happens after a market decline.
That can certainly be unnerving but the fact is that the
fastest gains in a new bull trend happen at the beginning of
the trend not after the subsequent break of resistance. The
bright side of the choppy market over the last two weeks is
that there are plenty of stocks/indexes at support levels,
which creates buying opportunities. Could we be wrong and
there is no bounce after all? Yes, but the nature of trading
means getting in when the market has been disrupted and being
willing to step into new positions.
In the video we walked through what we feel like will be a
source of profits in the near term - mergers and
acquisitions. Companies have to do something with all that
cash they are hoarding and besides returning it to
shareholders you can put it to use by buying market share
from your competitors. As the market fundamentals have
improved this quarter, news and rumors of M&A activity
has been on the rise. Today we saw an announcement that JCrew
) was going to be acquired by TPG Capital and Leonard Green
& Partners and the stock moved up 17% immediately. The
'halo effect' of that news also benefitted the shareholders
of several stocks within the retail apparel industry
including Urban Outfitters (
) Abercrombie and Fitch (
) and American Eager Outfitters (
). We would expect that M&A activity will continue in the
near term, which is great but how do traders find these
stocks in advance?
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There are reasons why companies become acquisition targets
and in today's Ask the Expert video we will talk about what
those factors are and how you can use them to find stocks
that are likely acquisition targets before the fact. Its
easier than you may think and the rewards can be great for
investors willing to take on some risk.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.