These are just a few of the high flyers that are moving big time in this volatile market.
Talk about catching lightning in a bottle. Get these trades right and you won’t care too much if we are in a bear market or a bull market.
If all you care about are big, fat profits then the volatility in the current market should be welcome with open arms. It is that volatility that is resulting in big swings for stocks. Depending on the news of the day, a stock could find itself in the middle of a tidal wave of buying or selling.
It really doesn’t matter which direction.
Generally speaking, the momentum names are getting whacked the hardest on the short side. Here the overall market environment does matter.
Worries about emerging markets and a slowing economy combined with the Federal Reserve tapering its bond buying program rightly makes it difficult to pay a premium for any stock. Those stocks with excessive valuations don’t stand much of a chance in such an environment, but there are exceptions to the rule.
Be on the right side of the trade
One example is Michael Kors (KORS). That stock exploded higher after the company reported earnings that blew away expectations.
The trick is being on the right side of the trade. The best way to do that is with a core understanding of valuation.
That is not to say you cannot win with momentum plays like Kors, but you better make sure that if you are trying for a fast money trade on a momentum stock you need to make sure the momentum is likely to continue.
To get an idea of fast money trade potential I always start by using what I call the P/E Gap – the difference between a stock’s price to earnings ratio and its expected profit growth rate.
The P/E Gap is an excellent barometer of where we stand today.
From there I simply use a little bit of common sense to see how a stock will trade after a positive or disappointing news event.
Often times the trigger is going to be earnings, so let’s start there.
More earnings results will roll in next week, and here are three companies that will move in a big way for fast money trades: