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Running With The Bulls

How To Trade In A Bull Market


There’s a quick visual that can help you keep your bull markets straight from your bears. Think of bulls fighting and the way they move aggressively, reaching higher with their horns. A bull market is fueled by optimistic investors who are certain prices of stocks and other commodities are going to rise and will be sold later for a profit. Here are a few pointers for keeping up with the bulls.


The Long Haul


Bull or bear markets don’t change overnight. They are longer-term trends. Analysts say Wall Street has been bullish since March 2009 and there is no consensus on how much longer the bulls will be in charge. So if you want to think like a bull, keep in mind that day-to-day numbers aren’t important. Look instead at 3 month, 6 month, or even yearly averages.


How to Spot a Bull Market


The analysts at say it’s best to keep your eye on the S&P 500 instead of the Dow Jones Average if you want to spot an emerging bull market. They rely on the Relative Strength Indicator, or RSI, to come from below and cross 50 to signal that the bulls are taking over.


They also watch the 150-day Exponential Moving Average, or EMA. If the chart flattens out and then heads upward, that’s a sign that a bull market is beginning.


Timing is Everything


The best strategy is to buy early in a bull market and then sell when prices hit their peak. True, easier said than done, and that’s why you constantly have to do your research (see below). If you join in the optimism of a bull market, you won’t find the stock bargains you would at the bottom of a bear market. But you are nonetheless more likely to make a profit on your investment than if you had sat it out altogether.


Do Your Research


In any kind of market it pays to know what you are buying. Look at a company’s data to see if sales and earnings are on an upward trend. Ask yourself if the company is offering something that you, or other consumers, will continue to want.


Legendary mutual fund manager Peter Lynch has said this is an important step many small investors skip.


“Well, for some reason, the public looks at stocks differently than they look at everything else. When they buy a refrigerator, they do research. When they buy a microwave oven, they do research,” Lynch said. “Then they’ll — they’ll put $10,000 in some zany stock that they don’t even know what it does that they heard on a bus on the way to work and wonder why they lose money, and they do it before sunset.”


If Lynch is describing you, change your strategy!


Maximize Profits during a Bull Market


While you’re doing the research into different stocks, balance what you learn against your appetite for risk. The stock categories below can be money-makers during a bull market.


  • Small-cap stocks: These are smaller companies with potential for growth and a high rate of return, but no guarantees of either. The “cap” in the name refers to market capitalization, or a formula that multiplies the number of shares outstanding by the price per share. Investing in small-caps often means looking into the future and predicting an upward trend.
  • Large-cap stocks: These are the big guns, the traditional market leaders. Think Apple, Microsoft, FedEx. Strong companies should only get stronger in a bull market.
  • Cyclical stocks: In bullish times as the economy gets stronger, consumers increase their spending on things like housing, cars, and technology. That is good for the profits of these cyclical stocks. The best strategy is to buy just as spending is picking up but before stock prices rise. (Grab your crystal ball.)




Investment experts agree that whether you are running with the bulls or the bears, you need to diversify your portfolio for balance. Own a mix of individual stocks from small and large companies in different industries, as well as mutual funds and bonds.


Let it Ride


The markets can be volatile and the bulls and the bears can trade places, but historically stocks are profitable more often than not.  You may just have to sit tight when the bears take over, and wait it out until the bulls run back in and prices rise.

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