Greetings,
The recent mini-rally in the market came to a halt this past week knocking most stocks back down off their recent gains. The main reason for this retreat is the rising price of crude causing many traders to be conservative and pulling out of stocks. Many analyst speculate that the rise in oil will eventually translate into an additional expense on the corporate bottom line. This is true, but speculating on a corporation's profitability based on an increase of one line item expense doesn't make sense. There are too many other factors to consider when assessing a corporation's future profits. Factors such as other expense increases or decreases, sales projections, taxes, write-offs, depreciation, new technology and innovations and on and on. But this illustrates exactly how Wall Street works. Everyone is so anxious to get a sign of what is to come that they speculate and make market moves in anticipation of the future. Trading today is not about what is, but more about what the markets think will be. And thus, being in tune with the market sentiment is one key to success in trading. One thing to anticipate is what will happen when the price of crude drops again, the markets will rally in anticipation that corporate profits won't take a hit due to the added expense of fuel. I find very interesting how this works.
I was able to close one position this past week for a winner and cost average down another position during Friday's pullback. I sold AAPL at $38.99 per share on Thursday for a gain of sixty cents. The stock was climbing quickly that day reaching as high as $39.75 per share. Hopefully, others did better exiting this position. On Friday, I bought more EBAY stock at $34.50 per share. My limit order was to buy at $34.66, but I was filled at the lower price. My new cost averaged position for EBAY is $36.63 per share.
Next week will apparently be dominated by the movement in the price of crude oil. An weakness in the price should rally stocks back again barring any unforeseen surprises. With start of summer vacation it looks like the demand for crude will continue to be the headline.
Have a good week,
Anthony
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