By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets
At a recent Federal Reserve meeting, the market was made clear that interest rates were going to rise, which means that the burden on business in the form of interest on borrowed funds will increase. The ‘cheap’ money has run out, and now overvalued companies will be heading to their real quotes. If you look at the market, the corrections are already beginning, and there is a decline in each sector. Under these conditions, stocks will be forming ranges, although in most cases they are already here. If the price is at the lower boundary, then we should expect an even greater decline, as new support levels will be formed lower.
The ‘weak link’ under these conditions will be the companies that have shown a significant decrease in profits in the current quarter relative to the previous quarter and to similar periods of the previous year.
Tips for trading here should be sought in technical analysis, since the fundamental one will not show negative trends in Q3, as reports will be provided for the previous period, and they will be compared with similar periods of last year, which in most cases will show a positive trend.
In this situation, it is possible to consider trading for lowering overpriced companies, but the trader needs to be aware of the risk they will be taken taking, as due to the gaps at the opening, losses can be fatal.
FedEx, a leading mailing operator, is among such companies that are set to decline in the near future. Quarterly reports show an increase in profits compared to the same period last year. With this in mind, it would seem, there is no reason for concern,