How to Pick Auto Stocks in a Dull Market
Many people think of trading as some sort of glamorous, Gordon Gekko occupation. But the truth is that for most of the year, it can be downright boring.
We’re in one of those periods that has a good deal of intraday movement, but overall is ho-hum. In fact, the same sideways movement we saw last week (and the week before that) continues. This will be resolved at some point (down is my guess), but for now, it’s pretty dull.
That doesn’t mean dull markets can’t be played. One option is to take a hedged position where you go long a strong stock in an industry, and short a weaker one. That way if the market goes up, the long position outperforms the short position. If it goes down, the short drops more than the long.
If you’re doing that with autos, I’d go long Toyota (NYSE:TM) and short General Motors (NYSE:GM). You can see the strength difference in the charts below.
Back next week to put a nail in January.