A Dear Market Requires Careful Contemplation

If you do not own any stocks by now, you could be suffering from FOMO-fear of missing out.

For example, certain stocks just made new highs that might still look attractive yet may not offer new investors a great risk/reward.

Furthermore, certain stocks that I watch made new multi-year lows and reversed today with robust option buying.

That means that whether you want to buy a stock going parabolic or one that has reversed from the lows, there are two important questions to ask yourself.

First question: How does the macro picture look?

In other words, do you think the overall market will continue to rise? Plus, how does the sector of the stock you want to buy look?

OK-It’s really one broad question with sub-questions.

Our photo depicts this perfectly.

The subject contemplates both bright clouds and those dense with rain.

Please, if you will, picture me the hummingbird whispering in your ear.

What is the second question and which specific stocks exemplify my point?

No matter what condition the market or the specific sector of the market is in, always wise to ask:

What is the amount of risk I am willing or should take compared to the reward I can reasonably make?

In other words, you must determine the timeframe of your trade. Day trade? Mini Swing? Position Swing?

Beginning with General Motors (GM), today it made a new all-time high. A parabolic move if ever I saw one!

Let’s say you missed the move from 33.00, 35.00 or even 37.00-all places it broke out from.

Today it traded as high as 43.70. You just started to pay attention. Car sales reported fantastically.

The market is also on new highs. You must believe the move will continue.

The sector GM is in is Consumer Goods. You must also believe that consumers will continue to have the confidence to spend more money. Incidentally, seasonally, this is reputably a good time for that.

Generally speaking, stocks in parabolic mode are best with tighter risks and quicker profit targets. The reason is obvious-any turnaround can hurt badly.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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