Don’t Be the Sucker in These “Sucker Rallies”
I don’t like the Wall Street bromide to “buy when there is blood in the streets.” It encourages inexperienced stock investors to jump into the market at the first sign of panic.
Little do they know what a bunch of Nervous Nellies occupy Wall Street’s trading desks. You can easily get caught up in one of their “the world is ending” tantrums and decide to buy, hoping to catch the next mega-rally on its way up. And the market can indeed go up at that point. But too soon it starts to fall again. Only this time it falls to new lows… and you’re sitting on giant losses.
These little rallies are called “sucker rallies,” and you can see why. Since the market peaked last October, there have been eight of them.
A better way to take advantage of the mini-rallies that occur during a bear market is to sell the stocks or mutual funds you don’t like when their prices get pushed higher. These rallies have been lasting 2-3 weeks. Getting rid of unwanted stocks 10-12 days into a rally is a good way to prune your portfolio while keeping your losses down.
[Ed. Note: You can make money on companies that are ready to crumble. Learn how to spot the "red flag" signals that could predict (with as much as 92 percent certainty) when a company's stock is going to tank.]
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