Opinion: ‘I see buying opportunities’. How this stock trader with 40 years of experience makes money in a bear market

A professional trader with over 40 years of stock, options and futures experience, Howard Kornstein developed and refined his strategies while facing every market environment imaginable. He has little patience with those who claim they can’t make money trading, even during the current bear market.

“This bear market is mild,” says Kornstein. “I see buying opportunities. A lot of people took money out of the market a few weeks ago when the market went down. Guess what? The market will go back up, as it always does.”

Recently, he has been accumulating shares of Invesco QQQ Trust QQQ,
+1.81%
because there was a massive sale. “In the first week of July, QQQ and SPY SPY,
+1.91%
They were good buys,” he says. She stops trading, she adds, when “the casino or the table is too hot.”

When will Kornstein sell QQQ? “When taking a trading or investment position, you need to know when you are going to sell before you even buy it. Based on technical analysis, I have determined that $350 or more is my selling point for QQQ.” (Note: Your target price could change in the future depending on changing market conditions.)

Buy at the minimum of 52 weeks

Kornstein uses a simple stock strategy that has worked for decades. “I find an established company whose shares have fallen to their 52-week low and are making a U-turn. This means the stock is recovering. This is a classic and reliable trade. By buying at the 52-week low, you have reduced your risk.”

An indication that a stock has rallied is when the 20-day moving average crosses the 30-day moving average (ie the simple moving average crossover strategy). According to Kornstein, that’s a sign that stocks may have bounced off their 52-week low and could go higher.

Kornstein describes the kind of companies he likes to pick up on the lows: “The goal is to buy well-established companies that make tangible products, not intellectual property. I have positions in Boeing BA,
+0.40%,
Lockheed Martin LMT,
-0.48%,
and Schlumberger SLB,
+3.10%.
These are companies that have been around for a long time and sell real products. nvda,
+2.54%
and Advanced Micro Systems AMD,
+3.19%
there are other companies that fit this criteria.” Kornstein adds that he favors dividend-paying stocks, a strategy adopted by veteran investor Warren Kaplan, the subject of a recent MarketWatch feature.

Sell ​​at the maximum of 52 weeks

When a stock hits a 52-week high, Kornstein sells. “I know ahead of time when to sell,” he says, “and one rule I obey is to sell at your 52-week maximum. When I take a position, I always identify my starting price beforehand.”

Kornstein warns that the buy-and-hold-forever strategy is unreliable. “The bankruptcy of General Motors is a good example,” he says. “He always knows when to get out of a position.”

assume you’re wrong

Another Kornstein rule: After you buy a stock, always assume you’re wrong about a position. That’s one of the ways you reduce risk. Says Kornstein: “I build up a position by starting small with 10 or 25 stocks. If it goes against me, I stop accumulating and wait. Everyone thinks that when they buy they are right and they make a lot of money. But when it goes against them, many investors refuse to acknowledge this fact. They think the stock will come back and are surprised when it doesn’t.”

Kornstein adds that many investors become too emotionally attached to their stocks. So it’s hard for these investors to sell their losers.

start small

Although Kornstein has substantial positions, he always starts small. “I could buy 10 shares at the end of the day. I put my money on the table. If I’m right, I’ll keep adding to the position. If I’m wrong, I’ll sit in the position and see what happens. I never take big positions at the same time. You scale or increase over time.” The key, he says, is to figure out in advance how many shares to buy.

When an action goes against you

Buying at the 52-week low is a reasonable strategy, but it doesn’t always work. For example, five years ago Kornstein bought Exxon Mobil XOM,
+1.68%
shares at a 52-week low, but hit a 100-week low and then a 25-year low. “It took me five years to get out of that position and sell at a profit.”

The lesson: “I’m happy to single and double on my purchases,” he says. “I’m not trying to hit a home run. Patience is needed to be a successful trader or investor. If you are not patient, you should not trade.”

How long will this bear market last?

“The bear market will continue at least until December. Then we’ll see what happens,” says Kornstein. What makes him so convinced? “The bear market started when the Fed raised interest rates by three-quarters of a point. That was the beginning,” he says. “We know that in July and in October they will raise rates, because they said they would.”

However, Kornstein doesn’t care if it’s a bull or bear market. “I find opportunities in this market, and that doesn’t include short selling. i found that short circuit [betting that a stock or index will go down] It does not work well.”

Kornstein advises investors and traders to follow the facts. “I spent 40 years looking and finding out the facts, and it’s hard work,” he says. “Go ahead and buy individual stocks or ETFs like SPY and QQQ. They are very simple products.

He adds: “Find a strategy that works for you and keep using it. You can start by buying a share of a company that pays dividends and is at or near its 52-week low. This is preferable to trying to find the next pot of gold.”

Michael Sincere (michaelsincere.com) is the author of “Understanding Options” and “Understanding Stocks.” His latest book, “How to Profit in the Stock Market” (McGraw Hill, 2022), explores investing strategies in rising and falling markets.

Plus: Bank of America cuts S&P 500 target to ‘street low’ after recession forecast

Also read: Don’t be afraid of the bear. It gives you the opportunity to pick winning stocks and beat the market.

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