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Sunday, October 12, 2003
Good evening friends,
The NASDAQ is sitting near the 52-week highs and earnings season is upon us. Now we must decide weather or not to hold our positions going into earnings. I have been uncomfortable with holding in the past because we have been burned a couple of times. Overall I think earnings will be above expectations but the question is, is that already priced in? In other words, are they going to sell on the news? We all know a disappointment will cut a stock price in half and will gap down 50% at the open before you even have a chance to trade it. Do we want to risk this considering the reward we get if the news is good? What will be our reward? A gap up? I don't think so and that is because, I think the good earnings news is priced into most stocks already that is why they have been running ahead of the release. Remember that the market will almost always move in advance of the news. It is certainly a crapshoot and if you hold, you are no more than gambling.
Now let's change the subject a bit for a moment and talk about stocks under $5.00. If you read message boards, which I highly encourage you to stay away from (unless promoting our board of course) LOL. You'll find a lot of bashers in the crowd saying that they just shorted 100K shares, the company is going BK next week, the stock is trading this low for a reason and other various statements that are totally unfounded. I don't have an answer for their motivation to do this but what I can tell you is my answer to why the stock is trading at that level. It is simply this; a stock is worth no more than someone is willing to pay for it regardless of the earnings, the news releases, the CEO, the insider trades, the fundamentals and all of the other factors. None of that matters because you can only get what someone is willing to pay you for your shares. Stocks shoot up in bull markets and they get way over valued but we still pay the price because if we don't they continue to go up with out us. Before you know it, everything becomes so far over valued we have a bubble. (1998-1999). IMO we are in the next bull market already and even if you believe stocks are getting over valued it shouldn't matter to you as long as they keep going up. When the trend turns and they start falling, you get out with huge profits and sit on you cash or play the short side. But you don't do this until there is a clear signal that a trend has been broke. In other words, don't get shaken out because in Bull markets, their will always be shakeouts. If you look at charts in 98-99 you'll see there were plenty of small shakeouts but the market came back each time. We are seeing that pattern again now. Bear markets work the same way, stocks get so far over sold that they become ridiculously cheap (under 1.00 in many cases). But even then, nobody bought because of all the gloom and doom they heard on BSNBC and they missed buying NT at .43, SONS at .25, PUMA at .30, ONT at .06, TRPH at .12, and the list goes on and on. There are many, many more. All these companies were written off as going BK back in the doom and gloom days. Not so as you can see by today's prices. The point is this; I buy low priced stocks because we can make phenomenal returns if they start to run. I have a chart of NTES tonight to prove this point. It's gone from 1.80 to 72.00 in just 52 weeks. Imagine the bashers on that board a year ago? Would be interesting to see what they were saying on that board 1 year ago today. I'm not saying our stocks will run like this one did but you know if you buy a stock for $10.00, you can not expect it to go up to $720.00 in a year right? That's what it would have to do to make the gains NTES has made. All the above stocks are up 1000-5000% and more since their lows. I never buy at the lows so I'm not saying I could have made these gains but I have traded all the above stocks accept NTES (go figure) and have made a lot of money. I waited for the trend to change and got in, I had no idea they would run as much as they have, but then again, when I was trading them last year, we were not in a bull market yet so I just took what I could get at the time. I should have held them all, but I got shook out (with profits) during the sell offs in what was still a Bear market. Now we are in a Bull market, so I will tend to hold stocks a little longer than I have been during the last year. We must let the winners run. We'll never have a NTES situation if we sell on the first down tick. You must be willing to hold if you want the enormous gains. I'm looking forward to a good week ahead for stocks. If you know when a stock we are holding is going to report earnings, please post that to the board. This helps everyone on the board. Here are some stocks for you day traders out there. PXLW, SGMS, EPIC and NUAN. I'll see you all Monday night.
* REMINDER- I am coaching in a fall baseball tournament in Nevada on the 16-18 Oct. It's a five-hour drive so I will be leaving Wednesday night the 15th. Because of this, only a quick Bulletin will be issued the 15th. I will issue a full Bulletin from Nevada Thursday evening from the hotel providing I have connection. If not, there will be no Bulletin for that night. I will not be on the boards Thursday or Friday the 16th and 17th but will view all posts in the evenings from the hotel. This is the final baseball tournament of the season. |
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