Dow, S&P and Nasdaq All Down Big, Is This A Buying Opportunity?

by Das Brain 

NYSE Stock Trader Looks Down - Stock Market DeclineOver the last week, all the U.S indexes has been hit by a sell off of around 6%. Apparently, the jitters are over the sub prime loan issue problem that has hit the U.S, where low income high risk borrowers are having difficulty making their mortgage payments. A large amount of these borrowers are losing their houses and therefore getting out and selling their houses driving real estate prices down in some states.

Logic tells me that investors should really be selling just the financial companies exposed to sub-prime. These are financial companies that specialize in sub-prime mortgages to high risk borrowers, but the sell off has punished all financial companies, including banks and brokerges.

Over the last month, another sector that has been hit was retail, due to less than expected earnings releases early on last month. However, recently Coach (COH) had reported a good quarter and high profit but it still got punished and the stock price is now trading at its 6 months low.

So, does all this present an opportunity to buy stocks, like my post on market timing for long and mid term (Part 1, Part 2) says, this small correction fits the criteria. I have been buying January 2008 LEAPS or long term CALL contracts on many stocks. Some of the stock names that I have been buying are:

Abercrombie & Fitch (ANF)
Wachovia (WB)
InvestTools (SWIM)
Apple (AAPL)

Here are some others that I have been watching closely, and will move in when a bargain presents itself.

HSBC bank (HBC)
Morgan Stanley (MS)
Bank of America (BAC)

If you look at the list, you see there are quite a few financial stocks. These are solid companies that had nothing to do with sub-prime but has gotten dragged down by the panic surrounding it and are trading near their 1 year low stock price.

I think if I buy here and now, and hold until January 2008, I know I will be making a handsome return on my investment. Even for short-term trading I can make a few hundred dollars here and there based on the volatility, buying at resistance and selling a support.

There is always opportuntity in a down turn in the markets, amongst the panic you can find some gems if you look hard enough.

Remember to read my Disclaimer.

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