How to Value Consumer Stocks

B y w w w . P r o f i t a b l e T r a d i n g T i p s . c o m
How to Value Consumer
Stocks

http://profitabletradingtips.com/profitable-trading-tips/how-to-value-consumer-stocks
Stock traders make money when
stocks are volatile.

The most stable stocks are usually in
the consumer goods sector.

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Before We Continue…

But that is not always the case. u.s.
news writes that consumer
companies fall as U.S. hit the
skids.

If you are going to be trading them
the question is how to value
consumer stocks.

This applies to medium term for
swing traders and short term for day
traders.

u.s. stocks are skidding tuesday and
are on track for their biggest drop
in more than a month.

consumer companies are taking big
losses as investors worry about the
health of the u.s economy.

machinery companies are also
down, while concerns about
europe’s banks are hurting financial
stocks. the price of oil continues to
fall.

Investors flee to consumer stocks
when the market is ready to fall.

The idea is that these stocks are safe
havens.

The problem is that investors have
been pouring money into blue chip
safe haven stocks and P/E ratios
have been climbing beyond what the
market will bear.

Thus these stocks are correcting.
How to value consumer stocks is
traditionally with fundamentals.

What dividends do they pay? How
much money do they have in the
bank?

Do they have any debt? And how
strong are their brand names in the
niches they sell to?

But a problem arises when these
stocks become safe havens.

Overbought and Over
Priced

investopedia tells
what overbought means.

overbought refers to a situation in
which the demand for a certain
asset unjustifiably pushes the price
of an underlying asset to levels that
do not support the fundamentals.

in technical analysis, this term
describes a situation in which the
price of a security has risen to such
a degree – usually on high volume –
that an oscillator has reached its
upper bound.

this is generally interpreted as a
sign that the price of the asset is
becoming overvalued and may
experience a pullback.

In general a stock that has risen
rapidly on high volume in a very
short time tends to become
overbought.

From the viewpoint of technical
analysis the relative strength index,
stochastic oscillator and money flow
index are helpful ways to value
consumer stocks that have become
too pricey.

It Is All in the Timing

Stocks go up and stocks go down.
Buying and the bottom and selling at
the top are everyone’s goals.

But sometimes the market seems to
be chasing its tail and fundamentals
make little sense.

On such occasions it is best to hold
cash and only day trade in the
market.

There are numerous profitable day
trading strategies.

Trend following and taking small
profits is one approach.

Another is to follow the news of the
day and trade when the market
becomes volatile.

Traders who want more reliable
returns and less risk often do rebate
trading as many ECNs pay market
makers who place limit orders.

Trade only stocks at high volume
and set your limits to small
increments.

Get in when conditions are optimal
and get out when the market is not
making sense.

How to Value Consumer Stocks

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How to Value Consumer Stocks