As a trader myself, some of my favorite assets to trade are large tech companies. These include companies like Google, Apple, Amazon, Facebook, Twitter and more. Because these companies are already well established, deciding what's likely going to happen in the market becomes a much simpler process. For the most part, these are the type of companies that are dependent on overall market conditions. When the market is doing well, they do well and when the market isn't doing well, we tend to see declines. With that said, current market conditions are opening a strong opportunity surrounding these stocks at the moment. Ultimately, it's time to take advantage of downtrends. Today, we'll talk about why big tech is headed downward, how long the trends are likely to last and how binary options traders can take advantage of the trends.
Why Big Tech Is Headed Down
Really, the reason I'm expecting to see more declines in big tech has very little to do with tech as a sector. While privacy issues are becoming more of a concern now than they have ever been, privacy isn't the issue that's going to hit tech hard. Instead, it's the Federal Reserve. As you've probably read all over, the Federal Reserve is expected to increase its interest rate in December. While this is likely to take a heavy toll on the market as a whole, the tech industry is likely to feel the brunt of the pain. It's easy to see why when we look at the most recent earnings reports from big tech.
Just about every company in big tech has explained that the high value of the United States dollar has taken a toll on earnings. That's because companies like Amazon, Facebook, Google, Apple and more all do a good amount of business outside of the United States. Therefore, when the value of the USD is high, their products cost more in other regions. This ultimately causes a reduction in demand and weighs heavy on earnings.
When the Federal Reserve increases its interest rate in December, what it's really doing is adding value to the USD. After all, with a higher interest rate on the USD, investors will be more interested in investing in the currency. Because the USD is likely headed upward, big tech companies will soon struggle with foreign exchange rates.
How Long Are The Declines Likely To Last
This all depends on the Federal Reserve's plan. If the Federal Reserve does delay the rate hike again, which is unlikely, we can expect to see gains in December. However, in the likely case that the Federal Reserve does start gradual interest rate hikes in December, we can expect to see declines in the tech industry for at least several months. It could even last longer. Keep informed and always check out the latest financial news.
How Binary Options Traders Can Turn The Trends Into Profits
Before December, I'm expecting to see more declines as investors balance their portfolios for the larger amounts of risk that are likely to come in December. With that said, until the FOMC meeting in December, binary options traders should be watching tech stocks for profitable put option opportunities. When December does roll around, binary options traders should watch for news from the Federal Reserve. If the Fed does decide to increase its interest rate, keep taking advantage of the put options to ride the trends down to profits. In the unlikely scenario that the Fed decides to wait on an interest rate hike, binary options traders should look for call options to take advantage of the resulting upward movement.
What Do You Think?
What do you think is ahead for big tech? Let us know your opinion in the comments below!
[Image Courtesy of Mashable]