Wednesday’s Stock Option Trading Strategy!

October 3, 2007
Author: Peter Stolcers, Founder of OneOption

Today's strategy is to conduct research. A buying opportunity lies ahead. Be ready to buy on the market leaders. Yesterday the market took a little breather and that is spilling over today. Overnight, the markets were generally stable with the exception of the Hang Seng. It was down 2.5%. The ISM numbers showed a slight economic decrease, but that was largely expected. We have now entered a wait and see mode. All eyes are fixed on Friday’s Unemployment Report. Interest rates are relatively low and that makes stocks more attractive. I believe that earnings will continue to show modest growth. The valuations are not stretched and they are a sound investment. If the market pulls back on a weak employment number, it will eventually present an excellent buying opportunity once the decline stalls. A strong employment number will fuel this market to new all-time highs and you have to buy that breakout. Either way, I believe a buying opportunity lies ahead. You need to stay long commodity stocks. They are inflation proof because of global demand. They are also shielded by a falling dollar since the revenues are collected in foreign currencies. Tech and ADRs are another way to play the rally. The Chinese stocks might still have plenty of upside, but you need to make sure you are using stops. These stocks are highly valued and there is a chance for a sharp reversal, particularly now that Chinese investors are able to buy mutual funds that invest in global companies. That change could put pressure on Chinese stocks as money rotates into new investments. I am not expecting a major move in either direction during the next two days. This is a great time to lighten up your exposure and search for strong stocks. image

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