Trade Or Wait: Different Approaches To A Bear Market

Another week, another interesting market to trade, although I have broken my losing streak with a string of respectable green days. While no home run days—although I did post one day of $10,000 net profit—the positive momentum has helped buoy my hopes for the rest of March even as the broad market seems as though it is in for more strife.

Regardless of whether your a day trader or a long-term investor, the recent coronavirus-induced sell-off is throwing the market’s physics out of whack. The increased volatility has widened bid-ask spreads, the selling pressure has made even promising setups less reliable and the headline risk has made biotech stocks go absolutely wild.

Case in point, three of my biggest winners this past week,  BIO-key International, Inc. BKYI, Spherix Inc SPEX and Tiziana Life Sciences PLC TLSA are each biotech names with some positive treatment exposure to the COVID-19 outbreak. Of course, my biggest losses in the week were also biotech developing treatments for the virus, like AIM ImmunoTech Inc. AIM and Aytu BioScience, Inc. AYTU.

But while I’ve started to get my bearings in this new bearish market, other traders might still be waiting for a signal that this is the right moment to return to trading. This is particularly true among swing traders, most of whom are eager to see when the broad market will hit bottom and the buyers start returning to the market. And, given the massive point swings that have characterized the opening and closing of each market day, there is high potential for stocks to take off.

Ultimately, the coming weeks could likely see further swings in momentum that could benefit well-timed swing trades. However, given the historically high volatility the market has seen as a result of the outbreak, and with little indication that businesses will be back to normal any time in the near future, traders that are waiting for the right time to buy and hold may have to be a bit more strategic in how they play individual stocks while the rest of the market remains in turmoil.