Our lives have changed a lot over these past months. The stock market’s changed, too. The hot sectors and spiking stocks have shifted dramatically in the second wave of the pandemic. And to stay on top of the action, adaptability is key(traders).
In my last article, I talked about trading during the early stages of the pandemic and some of the ways traders are taking advantage of the unprecedented market volatility.
Here, I’m building on that with an update on how intelligent traders evolve to make the most of stock market opportunities in the “new normal” of the ongoing pandemic.
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The Market’s Still Crazy Volatile
Early on in the pandemic, there were a few key forces creating market volatility. There was the market drop and descent into bear market territory. We saw increased interest in safety measures and the rapid changes caused by lockdowns. And to top it off, an oil price war.
Seemingly anything related to medical equipment or a potential vaccine spiked. Lots of mid- and large-cap stocks related to travel, retail, or hospitality tanked. Oil stocks crashed.
For some traders and long-term investors, the volatility has been and continues to be bad news. Plenty of big company stocks are still floundering.
But for penny stock traders, there are still plenty of opportunities. It’s all about looking at what’s going on in the market and reacting to it. It’s moving away from trying to anticipate what might happen next.
The volatility has continued, but the catalysts and sectors have shifted. Here’s what’s happening now …
New Traders Are Making Waves in the Market
There’s a lot of new blood in the market.
Big events like market crashes generally tend to bring a lot of new interest to the stock market. The pandemic has magnified the effect.
Not only did we recently have a big shift in the market, but a lot of people have had employment shifts, too. In a best-case scenario, someone might have shifted to working at home. In a worst-case scenario, they might have lost their job entirely. Either way, there’s generally more time and flexibility to accommodate day trading.
The new flood of traders is a curse and a blessing.
Unfortunately, the curse is on the newbies who don’t know any better. Most of them don’t take the time to get educated about how the stock market works, and they’re blowing up their accounts left and right.
The blessing? The influx of new buyers and sellers creates even more volatility. That’s creating spikes based on hype or through short squeezes. For educated traders who understand how the market works, this can add up to even more opportunities.
There’s also a takeaway here: if you’re new to trading, take the time to educate yourself on how trading works before you start throwing money at the market!
It’s Not Just About Virus Plays Anymore
The virus is still very real. However, virus stocks aren’t the primary movers in the market anymore.
In fact, I personally haven’t been trading many virus plays recently. There are so many other sectors and catalysts moving stocks. For example …
Civil Unrest Plays
Following the tragic death of George Floyd, racial tensions hit all-time highs, sparking civil unrest.
This was a catalyst for plenty of stock spikes related to civil unrest. In particular, stocks related to police equipment started to surge. Traders saw stocks for things like non-lethal restraints more than double in just a few days’ time.
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Reopening Hype
There’s been plenty of movement in the market related to the excitement and uncertainty surrounding reopening measures.
Be warned: stocks that are up on reopening hype can be fickle. For instance, a positive report saying that unemployment isn’t as bad as anticipated can make a ton of stocks spike in the short term. But then another news report about rising cases and renewed lockdowns can create pessimistic drops. It’s smarter to react to plays like this rather than to try to anticipate.
Earnings Winners and Losers
Earnings reports have always been a big catalyst for stock movement. Right now, we’re starting to see the first earnings reports that reflect how the pandemic has affected companies.
Obviously, there are plenty of earnings losers right now. A lot of businesses had to either shut down or reduce operations due to lockdowns.
However, there have also been some huge winners — especially companies that have experienced increased demand based on stay-at-home orders. Think video conferencing, at-home fitness, at-home entertainment …
Electric Cars
One of these things is not like the other …
No, electric cars might not be directly related to the pandemic, but they’ve been trending during this second wave of the pandemic. It just goes to show that you never know what opportunities might come up.
As with many hot sectors, there’s a prominent sector leader (you probably know it and its quirky CEO) paving the way. That’s leading to all sorts of sympathy plays. Most smart traders have had or have an electric vehicle play or two on their watchlist lately.
Second-Wave Pandemic Trading: Adaptability Is Key
A lot’s changed in the stock market during the second wave of the pandemic. What hasn’t changed? Stocks are experiencing record volatility and the moves can be fast and furious.
If you want to take advantage of the ongoing market volatility, adaptability is key. Hot sectors cool down and the way that patterns play out is ever shifting. You can’t get too stuck in your ways or too attached to a sector or ticker … No matter what’s happening in the world, change is inevitable.
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