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Trading Hot Stocks
Investors and traders can profit from picking stocks that are hot. But, how does one go about trading hot stocks? One problem in long term investing is that by the time a stock is hot it has commonly risen to a high price to earnings ratio or price to sales ratio or fallen dramatically. A hot stock rises in price as the stock market discounts its intrinsic stock value or falls on poor earnings reports. Good stock picks in long term investing are overlooked stocks. The smart long term investor or the day trader picks these stocks and sells them when they become hot stocks. Trading hot stocks is a different matter. Trading hot stocks has to do with stocks that are currently popular, falling or rising in stock price, and which often present with high trading volume and stock volatility. Candlestick stock charts are the tool of choice of many who trade hot stocks. Technical analysis of stocks with Candlestick analysis gives traders an objective view of market sentiment and easy to read signals up which to act.
Hot stocks recently include Boeing with increased sales, Amazon with earnings that did not fall as much as anticipated, and Allegheny Technologies whose earnings went up 70% while the stock fell 3% because analysts had expected better. In these types of situations traders buy stock or sell stock based upon their expectations of adjustments in stock prices. There is typically a short period of market inefficiency as traders and investors decide how to price a stock based upon both new information, and more importantly, new expectations. In trading hot stocks with Candlestick patterns a trader reacts to signals that predict the next movements of stock prices. Easy to read Candlestick signals give traders an objective appraisal of what the market as a whole is thinking about an individual stock or stock index. Candlestick signals work for trading hot stocks directly and for options trading and futures trading of hot stocks as well.