Get into this market… carefully

If you’re new to the market, there’s a good chance you’re feeling a bit skittish about whether to jump into the market or wait for a green light telling you everything is all safe.

Sorry, I can’t give that to you.

But the light I see is blinking yellow — proceed — but do so with caution.

For the greater part of a year I was waving the STOP sign, telling everyone to get out of the market and sit on the sidelines, but in recent months I’ve been preaching that it’s time to start dipping your toes back into the market and do some cost leveraging.

That’s the best I can do for you.

I can’t — and won’t — hold your hand, tell you specifically what to buy — and tell you when to sell.

And if you find someone doing that on the Web — run away as fast as you can, as you’re likely dealing with someone trying to artificially inflate or deflate a stock’s price to benefit their own personal pockets.

The most you’ll get from me is names on my due diligence, with a strong caution that just because I have a name on my list — it doesn’t mean you should have the same name on yours.

For instance, if I told you I had McDonald’s on my due diligence list, it may be there because I could have bought it 10 points ago at a low — and I’m now trying to decide what share of the profits I should be taking from it — and then keep it on my due diligence list to await its next pullback to cost leverage myself back into a stronger position in the company.

A hyper in a similar situation would simply lay out all the wonder virtues of McDonald’s while it was trading at its high, hope enough people ran out to buy some — thereby driving the share price higher — and then they would unload their position — and if they owned a large amount of shares, they’re dumping the stock would cause the price to plummet — and they walk away with a nice profit — while you just got burned.

I don’t play those games.

There’s a lot of experts saying a bunch of nothing right now, because they’re unsure of where this volatile market is headed. Just yesterday the market took a nosedive in the midst of speculation about the possibility of the U.S. credit rating being on shaky ground — only to have Moody’s come out this morning and say the U.S. triple A rating is stable.

With today being the Friday before the Memorial Day weekend, watch for a lot of shorts to either be covering their positions or dumping their positions.

But none of this should worry you — so long as you’ve picked a few companies and have been doing your homework on them. If you want to buy them at 10 — they should be a steal at $8.50. And if they bounce up to $11, then your homework should reveal whether the price is too high, or its still a bargain price on a stock readying for lift-off.

For those who get complain that I sometimes will mention a new name to my due diligence list, without giving any reasoning behind it — this one’s for you:

New to my due diligence list today is Target. While I still keep Walmart as my mainstay on my due diligence list — I’m checking out Target with an eye towards the back-to-school season a few months away. Is it currently trading at a price that will soar in a few months when mommy’s need to put new back to school clothes on their children’s backs while staying away from the higher price mall retailers, as well as picking up some of their school supplies? Only some good old-fashioned homework will give me that answer.

Just remember the usual disclaimer: Don’t base any of your investment decisions on anything you read here. Do your own due diligence, or at least enough research to pick the right professional to do it for you.

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3 Responses

  1. I’m a member of EAM, but figure the odds of your reading my post are better on this site. I am the director of a boutique firm on the street and could use someone like you. Interested?

  2. Cathleen,

    I have been a faithful reader of this site for months and owe you a great deal for helping me to learn about the differences in the stock market of today vs what it was like in my parents generation. I trust your opinion and I know what you mean about there being a lot of boards aroun the Web where people have ulterior motives in hyping stocks, so I’m wondering if you would be kind enough to recommend another board I could visit. I find that I now have the basic understanding of the market from this board, but I’m in way over my head on your Cathleen’s Corner site on EAM. I wish you had a third board for that, but I’m sure two is enough. I’d like to learn more options trading, but it seems EAM is geared more toward the more professional traders like you and Pete. Also would like to know what site you recommend someone join who is just beginning to trade options. I know Pete runs Optionmonster, but would like to know if you think that’s the best one for us newbies.

  3. […] also told you back on May 22 that while Walmart has been a longstay on my due diligence list, I had recently added Target. […]

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