Stock Sellers May Be Overreacting

The Wall Street Journal suggests today there may be some overracting to the latest increase in Middle East tension. The article, "Keeping Cool Amid Global Strife" in the Money & Investing section, quotes an old British maxim from a banker during the Napoleanic Wars:

Buy to the sound of cannons, sell to the sound of trumpets.

Essentially the WSJ says that the market tends to overreact to crises like these. It notes that "only when economic fundamentals have been seriously damaged, usually in the form of a disruption in oil supplies, has the Middle East fighting led to serious market trouble."

From this headline, here are the strategies we've discussed before that you may find of particular interest. These strategies all look for opportunities after major sell-offs:

• Feel the Bottom? See the Signpost: Ways of determining bottoms using Trade-Ideas
• Oversold, Phoenix: Catch the bargains as they roar back from previous beatings
• How to Find Oversold Stocks: 'Nuff said
• Get the Golden Goose: Finds stocks that had been trading down but are making a confirmed move up
• Sequence Analysis: What strong opens after weak closes do to the markets' trend. Vice-versa

If you subscribe to the WSJ online, see the article here.

Interestingly Dr. Brett Steenbarger comments today on what to do with these failed patterns and overreaction. Check out his article here.