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Opinion: “I see buying opportunities.” How this 40-year-old stock trader makes money in a bear market

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Howard Kornstein, a professional trader with over 40 years of experience in stocks, options and futures, has developed and refined his strategies against every imaginable market condition. He has little patience with those who claim they cannot make money trading, even during the current bear market.

“The bear market is soft,” says Kornstein. “I see buying opportunities. Many people took money out of the market a few weeks ago when the market went down. Guess what? The market will go up again, as always.”

Recently, he has been accumulating shares of Invesco QQQ Trust QQQ,
+0.36%
because there was a big sale. “In the first week of July QQQ and SPY SPY,
-0.24%
were good buys,” he says. He stops trading, he adds, when “it gets too hot in the casino or at the table.”

When will Kornstein sell QQQ? “When you open a trading or investment position, you need to know when you are going to sell before you buy it. Based on technical analysis, I have determined that $350 or more is my QQQ selling point.” (Note: its target price may change in the future depending on changing market conditions.)

Buy at the 52-week low

Kornstein uses a simple stock strategy that has worked for decades. “I find a solid company whose stock has fallen to a 52-week low and makes a reversal. This means that stocks are recovering. This is a classic, solid deal. By buying at the 52-week low, you reduce your risk.”

One sign that stocks have rebounded is when the 20-day moving average crosses over the 30-day moving average (i.e., the simple moving average crossover strategy). According to Kornstein, this is a sign that stocks may have rebounded from their 52-week low and may move higher.

Kornstein describes the type of companies he likes to buy on the cheap: “The goal is to buy well-established companies that make tangible products, not intellectual property. I have positions at Boeing BA,
+2.22%,
Lockheed Martin LMT,
-1.88%,
and Schlumberger SLB,
-2.97%.
These are companies that have been around for a long time and sell real products. nvidia nvda,
+1.37%
and advanced AMD microsystems,
+1.39%
There are other companies that meet this criterion.” Kornstein adds that he favors dividend-paying stocks, a strategy espoused by veteran investor Warren Kaplan, the subject of a recent MarketWatch article.

Sell ​​at 52-week high

When the stock hits a 52-week high, Kornstein sells. “I know ahead of time when to sell,” he says, “and one rule I obey is to sell at the 52-week high. When I open a position, I always predetermine the exit price.”

Kornstein warns that the “buy and hold forever” strategy is unreliable. “The bankruptcy of General Motors is a good example,” he says. “Always know when to get out of position.”

Let’s assume you’re wrong

Another rule of Kornstein: having bought a stock, he always assumes that he was wrong about the position. This is one way to reduce the risk. Kornstein says, “I accumulate position starting from 10 to 25 shares. If it goes against me, I stop accumulating and wait. Everyone thinks that when they buy they will be right and make a lot of money. But when it goes against them, many investors refuse to acknowledge the fact. They believe the stock will come back and are shocked when it doesn’t.”

Kornstein adds that many investors become too emotionally attached to their stocks. It is then difficult for these investors to sell their losing stocks.

Start Small

Despite the fact that Kornstein has a solid position, he always starts from small positions. “I could buy 10 shares at the end of the day. I put money on the table. If I am right, I will continue to supplement the position. If I’m wrong, I’ll sit in position and see what happens. I never open large positions at once. You scale or grow over time.” The main thing, he says, is to calculate in advance how many shares to buy.

When stocks go against you

Buying at the 52-week low is a smart strategy, but it doesn’t always work. For example, five years ago Kornstein bought Exxon Mobil XOM,
-2.00%
stocks at a 52-week low – but it fell to a 100-week low and then to a 25-year low. “It took me five years to get out of this position and sell for a profit.”

Lesson: “I am happy to make single and double purchases,” he says. “I’m not looking to hit a home run. Becoming a successful trader or investor requires patience. If you are impatient, you should not trade.”

How long will this bear market last?

“The bear market will last at least until December. Then we will see what happens,” says Kornshtein. What makes him so convinced? “The bear market began when the Fed raised interest rates by three-quarters of a point. It was the beginning,” he says. “We know they will raise rates in July and October because they said they would.”

Still, Kornstein doesn’t care if the market is bullish or bearish. “I find opportunities in this market, and that doesn’t include short positions. I have found that shorting (i.e. betting that stocks or indices will fall) does not work.”

Kornstein advises investors and traders to follow the facts. “I spent 40 years searching and discovering facts, and it’s hard work,” he says. “Stick to buy individual stocks or ETFs like SPY and QQQ. These are very simple products.”

He adds: “Find a strategy that works for you and keep using it. You can start by buying one share of a company that pays dividends and has a 52-week low. It’s better than trying to find the next pot of gold.”

Michael Sincer (michaelsincere.com) is the author of Understanding Options and Understanding Stocks. His latest book, How to Profit in the Stock Market (McGraw Hill, 2022), discusses strategies for investing in bull and bear markets.

More: Bank of America cuts S&P 500 target to ‘lowest on the street’ after recession forecast

Also read: Don’t be afraid of the bear. This gives you a chance to pick winning stocks and beat the market.

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