Question

Q1) Long answer question Discuss the market behavior the past week on local(Saudi) and international basis. Knowing what you know now, what investment strategies would you recommend? Are there any particular stocks you would buy/short? Any orders you would place? Hay

Answer 1

Though the graph isn't clear, but looking at it one can figure out it as bearish in nature with high volatility. It seems local and international markets are showing the same kind of movement suggesting a problem has hit world wide and possible phase where economy is about to enter recession. Keeping curent trends of bear market in mind following investment startegies can be applied :

(1). Short Sell stocks with bad outlook : Bear markets give on an opportunity to short sell the stocks when markets are expected to go further down. Thus stocks which are considered to be with non performing outlook should be sold short and covered when one expects they reached thier bottom.

(2). Identify good stocks to buy : In a bear market, the stocks of both good and bad companies will fall. But bad stocks tend to stay down, while good stocks recover fast. If the stock of a good, company goes down, it presents a buying opportunity at cheap valuation. Therefore one should go long on quality stocks at dips.

(3). Look out for dividend stocks : If you think bear markets will continue for long period of time, then one can buy a stock that has history of giving good dividends to its shareholders available at relatively cheap valuation.

Since market direction is quite uncertain due to high volatility, any order placement speculating market movment next day should be avoided.