The Bear Market Scare
Dear Penny Stock Millionaire,
The stock market is going INSANE lately. No big surprise that like all the other big news in the headlines, it’s connected to the coronavirus.
Sell-offs and despair abound… The volatility is wild. So I urge everyone to stay safe. But don’t think for a second there aren’t any plays. And if you don’t feel safe trading right now, that’s OK. Use this time to learn.
Right now there are a TON of trading opportunities… But you may have to adjust your mindset and strategies. This is why I say it’s key to learn to adapt to the market. It can change fast.
Right now, coronavirus stocks are hot. But it’s smart to think ahead. Looking for coronavirus stock sympathy plays is one way to do that. I’ll talk about how to continue to take advantage of the hottest sector in years…
Coronavirus: A Massive Global Catalyst
The new coronavirus that causes COVID-19 is massively affecting the global economy. First, China was on lockdown … From there, it’s been a domino effect.
The coronavirus is viewed as the key catalyst behind the market’s recent volatility and shift into bear market territory. Traders and investors are losing their heads over it.
It’s Getting Serious
The coronavirus is serious business. Over 180,000 people have been infected globally. There have been over seven thousand deaths. There are a lot of travel restrictions in place.
And you know what? That makes sense. Even if you’re not scared of getting sick, it’s SO important to be careful and cautious. If Tom Hanks and Rita Wilson can get this, you can too. And you can be asymptomatic.
So you can have the virus and not even know it.
It’s gone into full-blown WHO-defined pandemic territory. Italy has closed pretty much EVERYTHING — shops, restaurants, museums. Only vital businesses like pharmacies and grocery stores are open. We’re seeing more states here in the U.S. follow suit.
Disney World is closing. In the world of sports, we’ve seen seasons suspended and tournaments canceled.
The economic impacts of this will be huge. But remember that…
The Market Crash Is Not the End of the World
Here’s the good news: this market crash is NOT the end of the world.
Remember… we were in a bull market for over 10 years. The market kept going higher and higher. Too many traders got cocky and thought it would keep going on forever.
That’s not how markets work. If it wasn’t the coronavirus, something else would have knocked it down eventually.
So yeah, some traders and investors are losing big right now. I hate to see anyone lose… But I also know that there are ALWAYS opportunities in the market.
History repeats itself. I stayed profitable during the last market crash by adapting and following the market’s lead. So far, that approach is working for me and my students.
A lot of haters say I’m a dinosaur … But this is why it’s crucial to study the past.
Coronavirus Sympathy Plays: The New Market Edge
Even if the market is crashing there are tons of hot stocks.
Right now, companies that make vaccines, masks, or potential tests for coronavirus are seeing a lot of action.
I’ll say it again: You gotta be careful out there. The volatility is insane. Stocks can move super fast. Remember to cut your losses quickly. It’s rule number one for a reason.
And if you really want to expand the opportunities, one smart move can be to put potential coronavirus stock sympathy plays on your watchlist.
What Are Sympathy Plays?
Sympathy plays are when stocks related to a certain theme or sector see action simply due to association. It’s possible there’s nothing particularly exciting about these companies. But just being associated with a catalyst, hot sector, or other hot stock can draw in more traders.
As more traders get in on these plays … the action can snowball from there.
Let’s look at a recent example that’s not related to the coronavirus: electric cars. A few years ago, nobody cared about electric cars. Then Tesla (NASDAQ: TSLA) came along. Its stock started getting hot, and people also started to believe in electric cars in a new way.
In this case, Tesla is the sector leader — the one that paved the way for others.
Suddenly, all sorts of electric car companies started making news … and the stock prices started going up.
History Repeats Itself
History repeats itself in the stock market. The sympathy play phenomenon has played out time and time again.
Even though the coronavirus is a whole new ballgame in some ways, sympathy plays are still playing out as usual. So how can you start to find opportunities? Start by looking at the state of the market right now.
Coronavirus Plays: The Hottest Stocks Right Now
In this recent post, I talked about some of the hottest coronavirus plays I’m watching right now. Let’s review a few of them… This is how you start to get ideas for sympathy plays.
Aytu BioScience Inc. (NASDAQ: AYTU)
This stock spiked big a few days ago after announcing a distribution deal for a coronavirus test. It went up as much as 700%.
AYTU 3-month, daily chart — courtesy of StocksToTrade.com
It actually got halted a few times because of the extreme volatility, and it eventually turned into a short squeeze. I personally don’t like playing short squeezes. But a ton of my students reported profits.
Cocrystal Pharma, Inc. (NASDAQ: COCP)
This stock spiked in late February after announcing a license deal with Kansas State University for a potential treatment for coronavirus. Take a look at the chart:
COCP 3-month, daily chart — courtesy of StocksToTrade.com
COCP spiked again in March when the company made another announcement that the program was progressing.
Spherix Incorporated (NASDAQ: SPEX)
This company made waves in the market when it announced an option agreement related to coronavirus treatment with the University of Maryland, Baltimore.
Check out the big spike on the chart…
SPEX 3-month, daily chart — courtesy of StocksToTrade.com
The price eventually dropped… but it’s still on my watchlist. It could bounce again.
What can we learn from these stocks?
Anything related to the coronavirus could spike at any time, for any reason. So watch recent winners. Watch stocks that made my watchlist like Inovio Pharmaceuticals (NASDAQ: INO), Alpha Pro Tech (NYSE: APT), Decision Diagnostics Corp. (OTCPK; DECN), and Altimmune Inc. (NASDAQ: ALT).
Watch stocks like these daily — they could spike again.
The Next Wave: Potential Coronavirus Stock Sympathy Plays
So how could a sympathy play for coronavirus stocks play out? Here are a few examples.
Guardion Health Sciences Inc. (NASDAQ: GHSI)
Here’s a perfect example of a coronavirus sympathy play in action. Guardion announced a partnership with another company to develop a formula for immune support.
The press release denies any relation between the formula and coronavirus symptoms. But the mere mention of the word — even to deny any relation — caused a spike.
Check out the chart:
GHSI chart: 3-month, daily candle, coronavirus sympathy play — courtesy of StocksToTrade.com
Novan Inc. (NASDAQ: NOVN)
Here’s another great example of sector hype. This company makes products using nitric oxide. Don’t know what that is? I don’t either. But this 2005 study claims it can help prevent the spread of the SARS coronavirus.
Check out the chart:
NOVN 3-month, daily chart — courtesy of StocksToTrade.com
For a lot of people, the connection to treatment in the past is enough to garner interest today.
On March 9, it was trading around 40 cents at the open. Then it spiked after hours and opened the next day at about double the price. No news, no announcement related to the coronavirus — great sympathy play.
Key Tips for Finding Coronavirus Stock Sympathy Plays
Now that you’ve got an idea of how even the slightest connection to the coronavirus can spark sympathy plays… how can you catch these opportunities early?
Here are some tips for finding potential plays for your watchlist. Note that I’m saying your watchlist. This isn’t about trading just anything.
Don’t think you can outsmart the market… Instead, take steps to prepare for when the market presents opportunities.
Follow the News
An informed trader is a smart trader. Follow the news… be obsessive about new products in the pipeline, news releases, or any potential catalysts that could create spikers in or around the sector.
As we’ve seen so far with coronavirus plays, even fluff news can create some serious moves.
The Final Word on Coronavirus Stock Sympathy Plays
Coronavirus plays are everything in the market right now.
It’s impossible to know how long it will last or how it will continue to play out. That’s why you’ve got to learn to adapt to the market. You have to be prepared to trade when the right opportunities come along.
By paying attention to the biggest spikers in this hotter-than-hot sector, you can find trading opportunities … and potential sympathy plays.
Should you trade scared? Absolutely. I trade like a coward. But I still trade. And I stay safe. I remember to cut my losses quickly.
A cash position can be smart right now. That can help you stay more liquid and nimble. So when you find those hot coronavirus stock sympathy plays, you’re ready to make your move. That’s your bear market edge.
Listen to what the market tells you. Don’t try to predict… React to what’s happening in the markets. Then trade responsibly and intelligently based on that.
Editor, Penny Stock Millionaires