Trading Stocks during a Market Crash
This crash will be close to the 1929 crash in its severity. The issues will not be trading Tesla’s ups and downs as we discussed a month ago. Rather the issue will be if Tesla and others will survive! On our sister site, ProfitableInvestingTips.com, they discussed how far stocks could fall.
The 1929 stock market crash that ushered in the Great Depression was not a one day event and was not confined to October of 1929. There was a 10% correction of the market in March of 1929. And, the market came down 30% from its former high during the month of September. Then the market had three terrible days on Black Thursday, Black Monday, and Black Tuesday. On Black Thursday the market fell 9% before it rallied to “only” a 2% loss. In fact, the market recovered on Friday. But, on Black Monday it fell 12.6% followed by another 11.7% loss the next day, Black Tuesday.
Although the Dow fell more than 22% during the “Black” days, it continued to slide and have significant bad days for the next three years! The Dow Jones Industrial Average stood at 305 as the market opened on Black Thursday and by July of 1932 it was down to 41.22 for an 89.2% loss from its early September high of 381.17.
The market entered this situation in an “overbought” condition and the nation (as well as the world) had taken on huge amounts of debt because of low interest rates. As the virus burns its self out, killing people along the way and driving health care systems to the brink, things may look brighter but the financial wreckage will persist. Traders will need to keep fundamentals in mind as they use technical analysis tools to project the rise and fall of indexes and individual stocks.
The market will drive prices up and down on a daily basis according to the news but eventually those companies with strong balance sheets and products that keep selling during the pandemic will be reasonably strong. Those with debt problems and products or services that are being shut down by the pandemic will be in trouble and will need to be bailed out or they will not survive in their current form.
Who Will Get Bailed Out?
A company like Boeing is integral to the success of the US economy. Over the years they have typically vied with all of US agriculture for first place as an exporter. They were already having problems due to the 737 Max disasters and now will have trouble selling their other airplanes as airlines will not have any money and travel will curtailed for an indefinite period. This is a company that we can expect to see bailed out and the sort of stock that could be profitable to trade directly or with options.
