Don’t Let Knowledge Blind You To Stock Market Corrections

Ed Carson, News Editor at Investor’s Business Daily, joined the Investing with IBD podcast this week. With years of experience processing news stories on leading stocks, he shares how too much knowledge can hurt. Especially if it blinds you to the reality of stock market corrections. Finally, Carson goes through reasons for watching United Parcel Service (UPS), Vale (VALE) and Mastercard (MA).

Audio Version Of Podcast Episode

Video Version Of Podcast Episode


Stock Market Corrections Provide Opportunities

Ed Carson points out that the strength in indexes hasn’t necessarily translated to portfolio gains. The megacaps pushed indexes to new highs while many growth stocks had a tougher go. Stocks like Upwork (UPWK) quickly got the rug pulled out from beneath them.

Also, as indexes got extended, that made aggressive buying more dangerous. Whether this turns into a full-blown stock market correction or just a minor pullback, ignoring the weakness can lead to larger drawdowns in your portfolio. But Carson reminded listeners of the reason to be optimistic. Stock market corrections and pullbacks create opportunities for new purchases.

Carson also discussed how getting to know the story and the fundamentals of a company is important. However, you need to temper the enthusiasm with the reality of what the stock market tells you.

Want more from Ed Carson? Check out IBD Live, where he regularly gives market analysis in the first hour of trade

Using your deep research to dig into a position counter to stock market feedback isn’t smart. Don’t let your knowledge blind you to signs of stock market corrections. This why loss cutting rules are important to let you know when either your thesis is wrong or your timing is off.

Trade Ideas: UPS Stock, Vale Stock, And Mastercard Stock

Carson is keeping an eye on a few bellwether stocks as indicators of market and economic health.

UPS Stock

The economic shutdown was a boon for e-commerce, and UPS stock in particular. But it can benefit from expanded economic activity without the volatility of commodities.

On the chart, UPS stock had a strong move in May despite the stock market correction in the Nasdaq composite. While UPS stock consolidated over the last couple of months, it’s held right around its 10-week line and the relative strength line hasn’t dropped in a big way.

It’s a stock building on strength as opposed to just recovering.

Vale Stock

Having exposure to top-quality stocks in different sectors can help combat sector rotation. Vale stock is leading among the miners partly for the diversity of its mining operations.

Cyclical stocks are different animals than your typical growth stocks. The dramatic difference from a shutdown economy during the coronavirus stock market correction, followed by a catching up of supply chains, increased the difficulty of forecasting in a rapidly changing environment.

Mastercard Stock

While the financial stocks moved strongly with a rising 10-year treasury yield, Mastercard stock is in a different spot. Transactions are where the money is at.

Carson notes that as a former IBD Long-Term Leader, Mastercard stock has a chance to return to its stable earnings with a return of cross-border travel.

Want More? Stay Abreast Of Stock Market Action Using IBD Tools

Ed Carson frequently summarizes the daily action in a stock market today column at the end of the day. It includes warnings signs of stock market corrections and clues to important market turns.

For individual stock ideas, it’s always a good idea to check IBD’s Stock Lists page. UPS stock is a member of the Big Cap 20 list.

You can also get timely alerts on stocks from our premium products. Mastercard stock and Vale stock are both recent additions to IBD’s SwingTrader.

For new episodes of “Investing with IBD,” subscribe to our podcast on Apple PodcastsGoogle PodcastsSpotifyStitcher or your listening platform of choice.


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