When the new U.S. political administration took office on Jan. 20, few realized how quickly the Biden legislative team would crack down on the technology sector, particularly the big tech niche of the economy. But less than five months into his presidency, Biden has already installed several virulent anti-business and anti-tech operatives in the Dept. of Justice, the SEC, and the Federal Trade Commission. All three have long histories of wanting to either break up or in some way reorganize tech giants like Alphabet (Google), Amazon, Microsoft, Apple, and many others. The crimes these corporations have committed? Being too successful.
But, as every investor knows, what’s bad for one group means trading opportunities for others. This old rule is especially applicable when government agencies and regulators announce, long in advance, their intentions. For people who own securities and regularly speculate on long-term or short-term prices, this sort of news can literally turn to gold. For, where corporate fates are concerned, knowing in advance how stock prices might behave is the best tool any trader could have. Here’s an overview of how the Biden administration’s anti-business stance could play out for the big tech companies’ stock prices, and what it all means for profit-seeking investors and speculators.
Speculative Markets
One area where active, attentive traders can take advantage of opportunities created by government regulation is in speculative markets. In fact, even relatively inexperienced trading enthusiasts can capitalize on these kinds of quick price moves as long as they have instant access to speculative securities like futures, forex, options, and more. For example, using the Metatrader 4 platform, just about anyone can place orders before regulation-induced price swings take place. Of course, that assumes the trader already has and uses MT4, works with a broker who has direct access to speculative markets, and follows economic news closely. Online brokers are often the main access point for anyone who wants to trade the news, because doing so required speed of execution and the right tools to place accurate orders.
CFDs
Contracts-for-difference (CFDs) are one of the tools used by people who don’t want to own the underlying security, in this case tech stocks, but would rather simply guess the direction of an upcoming price move. When a company as huge as Apple, to take one example from the sector, faces the imminent prospect of regulatory breakup, heavy taxation, massive fines, or worse, CFDs can be anyone’s best friend. The key to success for using CFDs, other than working with a broker who allows account holders to use them, is staying abreast of business news.
When the current U.S. administration gets down to brass tacks and begins hitting the bit tech companies with harsh regulations, one strategy could be to purchase CFDs that assume stock prices will drop. It seems like a relatively reasonable guess, and one that could turn into several profitable trades. Of course, nothing is guaranteed, and prices could rise. Nevertheless, CFDs are a fast, simple way to use current events to predict stock price changes.
Buying Into Dips
In the world of stock prices and mega-corporations, few things happen in a linear fashion. Even when bad news hits, like a detrimental lawsuit result, anti-trust legislation, or a product liability settlement against a company, prices typically fall a great deal and then rebound some amount less than the fall. Price dips like these are opportunities for news-watchers. Why? The COVID pandemic is a good example.
Nearly every major corporation in the retail sector took a massive hit to its stock price when the global virus first began to spread. Then, slowly, the majority of those same businesses saw their share prices rise again, sometimes back to their original levels. Buying into dips means having access to a competent, service-oriented broker and knowing how to watch price action. Getting in at the bottom can be a tricky task, but people who buy dips usually wait for a slow recovery to show itself before diving into a position on a stock that has just fallen significantly.
Bear ETFs
Exchange traded funds (ETFs) are a common vehicle for people who want to buy shares that mimic performance across an entire sector, like technology. If bad news is coming to a sector, and you want to play the downside for a profit, it’s possible to purchase a bear ETF, a fund that does well when the underlying sector does badly. Some bear ETFs work to triple the effect of a price drop, which means investors stand to earn outsize profits in bad times.
Leave a Reply