For some companies, their price per share is correlated to how certain commodities perform. Take crude oil, for example. When the price per barrel of oil dropped within the international market just recently, companies like Exxon Mobil and Chevron saw their stock prices drop by about 1 percent. This might not seem like a lot, but a drop of 1 percent means millions of lost dollars for these companies.

The thing to take away from this lesson is that if you are monitoring commodities and their prices, you might be able to get a jump on trades involving companies that require a specific commodity in order to thrive. If you are looking at an oil refining company, when oil prices drop, as you can see, investors stay away from the big oil producing companies, causing their stock to lose demand. This would make a good opportunity for a short sale. The opposite will also hold true. When a commodity increases in price, the companies that depend on that commodity will usually have an increase in demand as well. Using products like the Hedge Fund Copier may help you trade smarter when it comes to these instruments.

There are some companies that thrive off of drops in commodity prices. Take Wal-Mart for example. When commodities tumbled downward last month, Wal-Mart stock went up in value by more than 4 percent. This is because they have a higher profit margin when they do not need to pay such a high price for their products. This should show just how finicky domestic companies can be in relation to international demand for commodities.

• «Previous Post
• Next Post »

---