It’s important to know what bear market stocks to buy when an economic downturn hits. Naked puts, put debit spreads, and call credit spreads are great ways to make money in bearish markets. Commodities such as gold and silver $GOLD, consumer staples such as $WMT, $TGT, and $JNJ, and defense stocks such as $LMT and $GD are all great to look at when the market takes a downturn.
What Are Good Bear Market Stocks to Buy?
- Here are some good bear market stocks to buy:
- Gold stocks: typically stocks like $GOLD move up.
- Consumer staples like $WMT, $TGT, and $JNJ.
- Defense stocks like $LMT and $GD.
- Biotech stocks run at times too depending on what’s causing bear market.
Since the market trades in cycles there are going to be bearish markets. There are a lot of traders who may not like bearish markets but it’s actually a good thing (bullish vs bearish and how to make money in any market).
Bear markets keep stocks from becoming so expensive the normal trader can’t afford them. The ebb and flow of a bull and bear fight is healthy for the market. Trader’s don’t have to be afraid of a downturn.
Bearish markets don’t last as long as a bull market. Learn how to trade the bear markets and find the right stocks and you can still profit (try our stock picks service free.
Bear markets are usually caused by a recession or depression. When traders become pessimistic, prices fall. There are different sectors that stay consistent no matter what the market is doing.
These sectors have stocks that are profitable. Since sectors house multiple stocks, there’s always money to be made. Even if a stock is losing money, you can profit off that.
You need to know how to trade bear markets whether short selling or buying put options. Read our post on put and call options explained to learn more.
Sectors such as utilities, telecom, healthcare as well as consumer staples. These sectors stay strong in a bear market because even in an economic downturn, we use them. We’re paying our cable bills and cell phone bills.
We have to pay our utilities and we may need to see the doctor. The stocks in these sectors are always generating revenue. Now they may not be skyrocketing in a bearish market but they are safe plays.
Basics of Bear Market Stocks
As mentioned earlier, different sectors stay strong in bear markets. These sectors contain stocks that are still making a profit in a down market.
Utility companies always have a stable income. The provide the most basic needs for households as well as businesses. Most of the profitable companies are located in the US and Europe. Some of the top companies are Duke Energy (DUK), National Grid (NGG), NextEra (NEE)and EDF to name a few.
As always it’s up to you as a trader to do you due diligence on any stocks you’re looking to trade. Just because these tend to be strong stocks doesn’t mean it’s a sure bet.
Food and beverage companies like Coca-Cola or Chipotle can be bear market stocks to buy. People need to eat. That is never going to change. When the market is showing a lack of conviction look to the stocks that have an income no matter what.
Check out blue chip stocks too. Blue chip stocks have what it takes to handle a recession. They also have dividends and lower volatility. They stay steady and you can pocket the dividend payouts (learn how to short a stock if you want to make money when the market is going down).
Bonds Are Bear Market Stocks to Buy
Bonds can be a safe haven for investors in a downturn. A bond is a fancy way of saying IOU that companies and the government use to fund their day to day operations.
Bonds are less likely to lose money in a downturn. If you have them in a portfolio they help cushion the loss of any stocks you may also have. Bonds pay a regular interest so there’s a steady stream of money coming in.
Even if interest rates drop, a bond continues to pay out at a set price. There are many different types of bonds. If that’s something that interests you, research the different types to find one that works best for you (bookmark our stocks lists page which is updated daily).
How Do I Know What Bear Market Stocks to Buy
A bear market isn’t going to sneak up on you. Take a look at charts. Charts are so important in finding bear market stocks to buy. If you don’t know how to read a chart then read our post on how to read stock charts for beginners.
The tug of war between the bulls and bears forms candlesticks patterns. These patterns tell you what direction the market is headed. There are large patterns like descending triangle patterns. If you see that pattern be extremely aware of a bearish bias coming.
Zoom in to the large triangle pattern and see what is there. Do you see head and shoulders patterns or rising wedge patterns? You can even zoom in further and see the small patterns such as shooting star patterns, falling three methods patterns or indecision candles like spinning top candlesticks.
Candlesticks charts and patterns are there to give traders fair warning. Study them. Get to know what they mean through stock training. Then you won’t be taken by surprise when a bear market comes and you can find bear market stocks to buy.
Bottom Line on Bear Market Stocks to Trade
Bear market stocks to trade will always be easy to find. Put a stock scanner to good use. Learn the sectors that are stable in a bear market. Then you’ll always be able to profit no matter what direction the market goes.