Wall Street Sink after Fed’s Meeting

December 12, 2007

On Tuesday Wall Street sink more than 300 points after the Fed decide to cut its benchmark interest rate by 0.25%, unsatisfied some stock investors who expect the central bank would take more belligerent actions.

After the flat opening on Dow Jones and remained quite for most of the trading session before the Fed interest rate cut decision, fell 300 points. Most of the stock market investors were anticipating at least there could be 0.50% basis cut in interest but with the 0.25% interest cut by the Fed leads the stock investors for profit booking and this made the Dow Jones to plunge more than 300 points, although Fed as expected also cut the discount rate, the rate it charges to lend directly to banks, by a quarter-point to 4.75 percent.

It is also having said that Fed signaled that further cuts are quite possible if a severe downturn in housing and crisis in mortgage lending worsen. Before the Fed decision the market was in descent mode and made and strong bounce-back after strongly tumbling below to 13K mark on Dow Jones.

The Dow fell 294.26, or 2.14 %, to 13,432.77 after dropping as much as 313.29. Strong fall was also seen on broader indexes. The Standard & Poor's 500 index fell 38.31, or 2.53%, to 1,477.65, and the Nasdaq composite index fell 66.60, or 2.45%, to 2,652.35.

Tips - Buying at support level and selling at resistance level

While doing stock trading the one of the tips or strategy could be to buy stocks at support level and sell stock at resistance level. Normally any stock tends to trade in a narrow range with very limited liquidity and volume. At such situation maximum of the stock investors avoid entering in these stocks but stock trader thinks this as good stock trading opportunity as long as these stock are trading in their specific price zone range. Stock traders always keep monitoring these stocks and enter in such stock pick at their support level and normally exit at their resistance level.

Say for example XZY Company stock is roughly trading in a very narrow range of $52 to $55. Stock trader immediately enters in such stock at $52 and exist their position near to $55.

Now you might be thinking of how stock trader makes out to enter in this stock at $52? Looking to the previous chart history of this stock the stock traders immediately make out $52 as strong support zone. In many previous sessions this XYZ stock had came near to $52 and had bounce back and not made a downward breakout of $52. Whenever this XYZ stock had touch $52 or is very near to it a significant buying had emerged and stock has bounce back from $52 and this gives a clear indication that at $52 the XYZ stock has strong support which could be a buy signal at anytime if this stock touches or is near to $52.

Precautions to take
Stock trading has always been risky as no person in world would give you 100% prediction. Now in above example XYZ stock shows strong support at $20 but unfortunately if the stock breaks $52 and moved further down with significant increase in average volume clearly gives a signal that this stock had break its support level of $52 and at such point making a stop loss near to $50 to $51 could be a very good sensible strategy for avoiding any significant money loss.

Long term stock investment

Stock trading done for long term basis can be purely said as long term stock investment. Investing in stock if done in more regular strategic investment way can give you high returns. Many stock market investors basically retail investors are quite interested for long term stock investing plan rather than going for short term margin gain which is quite risky. Long term stock market investment gives an additional leverage position to a stock market investor if the stock pick choice is right, and also it does not get affected by the short-term volatility in the stock market.

Long term stock investment is more profitable and with regular performance of chosen stock pick (company) the stock investor gets regular dividend as well as bonus which is quite encouraging and cheering to investor as well as it spreads a message among stock market investor about the company’s goodwill, which helps to keep on consistently rising the stock price and generating high return to stock investor.

Long term stock investment is basically done keeping in view for making an investment for minimum of five years to as long as the stock investor prefer to keep it as an investment. Investors who generally gets regular returns via that stock pick through a source like regular dividend and bonus does not sell that specific stock pick and keeps on holding that stock pick as long as their best stock market investment is performing good by maintaining the current market share and well as increasing its company brand to more customer base.

Before going for any long term stock investment approach, proper study of best stock is needed along with proper strategic investment plan. Long term stock investment is usually done in the stock which has a good reputation, which has gained stock market investors’ confidence and which is performing very well at every time interval. Stock prices are always volatile and do not remains stable at any point, with keeping this in mind, no full investment in stock is done at one point, but professional stock investor use strategic investment plan which help them to make regular investment in their same favorite stock at various prices of their stock pick. The strategic investment plan is done in two ways.

1. Stock market investor who are more confident on their chosen stock pick make regular investment in stock at every significant dip in their favorite stock pick, keeping in view the long-term returns. The stock market investor who makes investment in stock through this strategy uses every dip in their favorite stock pick as an opportunity to make their investment.
2. The second way the stock investors invest their money in their favorite stock pick is by regularly investing at every rise that happens in their stock pick. Stocks which are consisting performing well always have a chance to rise higher by gathering more attention of fellow stock investors.

With the help of these strategic investment plans, the stock investors invest their money in their stock pick at every specific time interval which reduces their risk appetite and protect their money at every ups and downs of stock market.

The some of the long term stock investing benefits

1. Your long term stock investment return is always high than of fixed deposit or small savings in bank.
2. Gives you an additional leveraged position against rising inflation.
3. Regular returns from stock investing in the form of dividend and bonus if the stock pick is consistently performing well.
4. You are always a share partner of successful corporate of whom you are holding stocks.
5. Historical out performer than any other asset classes.