There are two risk factors that affect share price movement. Market factors
are referred to as systematic risk, and include all those things that are
out of a company's control. Gold companies have little control over the
price of gold, yet their share price has a strong correlation to where the
precious metal trades. Unsystematic risk is the second factor affecting
share price, and includes all those things that a company does control. The
launch of a new product with a lot of profit potential will obviously have
a profound effect on share price. It is important to understand that there
are two factors that each require consideration when making trading decisions.

The state of the market sector is very important when evaluating a company
or considering a trade. Stocks that are part of a strong sector often move
up despite otherwise weak fundamentals. Also, companies that have excellent
management and a solid business model may suffer if their market sector is
generally weak.

For that reason, investors looking to buy, or go long, a particular stock
must pay as much attention to the state of the company's market sector as
they do to the state of the company's business.

Traders and investors who want to make it easier on themselves should
simply focus on the market sectors that are performing well. This top down
approach stacks the cards in the favor of the investor who chooses a
concentration on strong sectors and then seeks out the leading stocks in
that sector. Often, even a weak company can do well if the overall sector
is hot and market euphoria is motivating market participants to buy any
stock in the sector.

If an investor finds a solid technology company when tech stocks are hot,
they will likely find more success than if they channel their investment
dollars into an equally fundamentally strong mining stock in a weak mining
market. Market psychology is extremely important.

When a market sector is strong, play the momentum. When the market is
showing little direction, focus on the company story. Finally, if a sector
is weak, ignore even the strong stories as it is unlikely that other
investors will be lining up to join you as a shareholder. The trend is your
friend, or your worth enemy.