www.CandlestickForums.com Debt to Asset Ratio The debt to asset ratio of a company is a strong indication of its financial health. A high debt to asset ratio indicates that a high percentage of the company’s assets are being financed by debt. Stock prices of companies that carry a high debt burden are especially sensitive to changes in the prevailing interest rate. Stocks of companies with high debt burdens may not be good risks for long term investing but may be good targets for day trading. As a company with a high debt to asset ratio may find its stock plummeting during interest rate hikes this sort of company might be good for options trading. Buying puts on a weak stock may be profitable if the stock price drops substantially. In that case traders will profit by the difference between the spot price of the stock and the strike price of the contract. A low debt to asset ratio will tend to support a higher stock price and, coupled with tangible assets, may be considered part of the margin of safety that long term investors seek in a stock.

1. Debt to Asset Ratio
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2. The debt to asset ratio of a company is a
strong indication of its financial health.
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3. A high debt to asset ratio indicates that a
high percentage of the company’s assets
are being financed by debt.
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4. Stock prices of companies that carry a
high debt burden are especially sensitive
to changes in the prevailing interest rate.
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5. Stocks of companies with high debt
burdens may not be good risks for long
term investing but may be good targets
for day trading.
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6. As a company with a high debt to asset
ratio may find its stock plummeting
during interest rate hikes this sort of
company might be good for options
trading.
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7. Buying puts on a weak stock may be
profitable if the stock price drops
substantially.
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8. In that case traders will profit by the
difference between the spot price of the
stock and the strike price of the
contract.
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9. A low debt to asset ratio will tend to
support a higher stock price and,
coupled with tangible assets, may be
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10. considered part of the margin of safety
that long term investors seek in a stock.
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11. As with all factors affecting trading and
investing the debt to asset ratio of a
company should be considered in regard
to other factors in fundamental analysis
of its stock.
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12. Successful penny stock investing has to
do with finding the value in devalued
stocks.
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13. A company with a promising new
product may have accumulated a
substantial amount of debt in order to
pay for research and development of for
an aggressive promotional campaign.
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14. In picking stocks an investor might be
less concerned about a high debt to
asset ratio if the company’s price to
sales ratio is low.
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15. In other words a company just starting
to realize a high level of sales may put
off retiring debt in lieu of aggressively
marketing their product, opening stores,
etc.
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16. When a day trader finds a stock with a
high debt to asset ratio he will be wise
do technical analysis of the stock.
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17. If the stock price is volatile it may be a
good trading opportunity.
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18. Using technical analysis tools such as
Candlestick analysis can allow the trader
to anticipate and profit by market trends
and market reversal.
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19. Traders have been using Candlestick
chart analysis ever since Candlestick
basics were invented centuries ago.
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20. This visual representation of stock price
movement is not only useful for tracking
stock but is also used in commodity
trading and trading options.
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21. In fact, a useful means of trading a
company with a high debt to asset ratio
may be to trade options on the stock.
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22. The trader who buys puts or buys calls
on a stock will only risk the price of the
options premium.
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23. On the other hand the trader who sells
puts or calls on a very volatile stock end
up with substantial losses.
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24. When trading stocks where the company
carries a high debt burden the trader
needs to understand if the stock is likely
to fall in price or if it has already suffered
substantial losses based upon its debt.
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25. Doing technical analysis with tools such
as Candlestick pattern formations will
help the trader see where the market
price of the stock is likely to go next.
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26. Online Stock Market Reviews presented
live via the internet by Stephen Bigalow
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