Healthy Stocks in Volatile Markets:

Almost all traders have found the current market environment extremely difficult to navigate. During the past three weeks we have experienced large overnight gaps in both directions and several wide-range intraday reversals. To some there is still the threat of a market crash. The bulls have had a difficult time, and despite the trend being firmly lower, shorting traders have had their hands full dealing with late-day reversals and witnessing bulls buying the dips.

Some bulls view this market as an opportunity to go bottom fishing but as history has shown attempting to pick bottoms can be very risky. While the markets remain in a very dangerous area, many stocks have managed to escape relatively unscathed. If the markets can rebound from this level, these stocks would likely continue to perform strongly relative to their peers due to the strong institutional support shown through the recent market weakness. Ideally, even if the markets stalled, these stocks would hold up better than the supposed bargains provided by beaten down stocks. Traders should acknowledge that caution is still required, and despite these stocks showing strength, if the markets continue to slide lower it would likely spill over even to market leaders. Buying healthy stocks is not foolproof, but the idea is that traders can increase their odds by sticking with stocks that have shown support from institutions.