In the past few weeks we have seen some small stock market rallies due to the downward movement in oil prices. This included rallies in airlines stocks, automotive stocks, and other stocks who are oil-dependent. However, do not be fooled by these up-swings which have no fundamental support. If oil drops $5.00 during trading, it does mean you should go and buy stocks from Ford or US Airways because nothing has changed. The market atmosphere is still the same and the company is still in the same position.
What you should do, is take advantage of these rallies and make money out of it. This would involve shorting stocks who are acquiring heavy gains from this type of news because oil is in an upward trend and will definitely swing up again. Thus, when oil prices swing up, the same momentum that brought these stocks up will bring them down. Additionally, short any stock that has rallied due to lower oil prices and is also expected to report negative news such as a bad earnings report because the downward momentum will be even greater.
Stocks to short today: Toyota - which reports its earnings tomorrow and is expected to be below estimates.
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