Jim in Anchorage Posted December 3, 2008 Share Posted December 3, 2008 How in the world can a company's stock be worth $10 in the morning, $40 at noon and $5 at the close? Link to comment Share on other sites More sharing options...
DC Tom Posted December 3, 2008 Share Posted December 3, 2008 How in the world can a company's stock be worth $10 in the morning, $40 at noon and $5 at the close? There's ways. I've seen stocks go from 80 to 300 to 40 to 200 in a single day. I once lost $10k on a trade when a stock went from 18 to 12 in ninety seconds. Which stock? Link to comment Share on other sites More sharing options...
Jim in Anchorage Posted December 3, 2008 Author Share Posted December 3, 2008 There's ways. I've seen stocks go from 80 to 300 to 40 to 200 in a single day. I once lost $10k on a trade when a stock went from 18 to 12 in ninety seconds. Which stock? Nothing specific- just in general. I am not a trader but what happened to fundamentals like P/E ? Link to comment Share on other sites More sharing options...
DC Tom Posted December 3, 2008 Share Posted December 3, 2008 Nothing specific- just in general. I am not a trader but what happened to fundamentals like P/E ? Traders don't trade on P/E. Traders trade on...whatever moves the stock at the moment. The first example I mentioned was Andrea Electronics, back in the '90s. A three million share float, and a couple of bozos shorted a million shares. Stock started going up slowly, eventually they had to cover their short position...so they basically tried to buy a million shares on the open market when no one was selling. Then the stock REALLY moved. It's called a "short squeeze", and they're lots of fun if you're the one doing the squeezing (the down payment on my house came from a short squeeze on a scrap metal recycler, a few years back.) I believe a few months later the company went under and the stock was worthless. So the shorts were right on fundamentals, ultimately. But the market doesn't move on fundamentals in the short-term. Link to comment Share on other sites More sharing options...
Jim in Anchorage Posted December 3, 2008 Author Share Posted December 3, 2008 Thanks for the lesson. Now I know why my I.R.A is such a size that I need to die 12 weeks after I retire. Link to comment Share on other sites More sharing options...
GG Posted December 3, 2008 Share Posted December 3, 2008 But the market doesn't move on fundamentals in the short-term. ... unless it's prophecized by the Revelations. Link to comment Share on other sites More sharing options...
Chump Change Posted December 3, 2008 Share Posted December 3, 2008 ... unless it's prophecized by the Revelations. Are they a new rock band or something? Link to comment Share on other sites More sharing options...
Chef Jim Posted December 4, 2008 Share Posted December 4, 2008 Thanks for the lesson. Now I know why my I.R.A is such a size that I need to die 12 weeks after I retire. Hell you're in great shape. Most of the people I come accross need to die twelve years before they retire. Link to comment Share on other sites More sharing options...
Jim in Anchorage Posted December 4, 2008 Author Share Posted December 4, 2008 Traders don't trade on P/E. Traders trade on...whatever moves the stock at the moment. The first example I mentioned was Andrea Electronics, back in the '90s. A three million share float, and a couple of bozos shorted a million shares. Stock started going up slowly, eventually they had to cover their short position...so they basically tried to buy a million shares on the open market when no one was selling. Then the stock REALLY moved. It's called a "short squeeze", and they're lots of fun if you're the one doing the squeezing (the down payment on my house came from a short squeeze on a scrap metal recycler, a few years back.) I believe a few months later the company went under and the stock was worthless. So the shorts were right on fundamentals, ultimately. But the market doesn't move on fundamentals in the short-term. The longer I looked at that the more interesting it was. what are you doing in a internet chat room? Link to comment Share on other sites More sharing options...
DC Tom Posted December 4, 2008 Share Posted December 4, 2008 The longer I looked at that the more interesting it was. what are you doing in a internet chat room? Killing time. I'm a government contractor; if I actually did work, I'd get in trouble. Link to comment Share on other sites More sharing options...
HopsGuy Posted December 4, 2008 Share Posted December 4, 2008 Traders don't trade on P/E. Traders trade on...whatever moves the stock at the moment. I believe a few months later the company went under and the stock was worthless. So the shorts were right on fundamentals, ultimately. But the market doesn't move on fundamentals in the short-term. "The markets can stay irrational longer than you can stay solvent." But then, we all know that. Here's an excellent paper I read today. Just buy stocks making new highs and employ a trailing stop. Simple, no? Link to comment Share on other sites More sharing options...
DC Tom Posted December 4, 2008 Share Posted December 4, 2008 "The markets can stay irrational longer than you can stay solvent." But then, we all know that. Here's an excellent paper I read today. Just buy stocks making new highs and employ a trailing stop. Simple, no? That was a hell of a lot of double-talk to wade through to learn that stocks are good when they keep going up, but when they stop going up they're bad. Read that strategy first in an edition of O'Neill's book years ago (the name of the book escapes me, which shows how much of an impression it made on me). Always had a problem with the strategy, in that if a stock keeps setting new highs, it eventually gets in to "greater fool" territory, in that everyone getting in to the stock late is getting in hoping someone's going to come along dumber than them and buy it off of them. There's danger in doctrine that's both inflexible and overly common. But then, if you can identify those "greater fool" stocks, you can do well going short. (Done that before, too). When you get down to it, I've had the best success following the simple rule of "Identify the fool in the market. If you can't identify him, you're the fool" and doing either the opposite of what the fool does or, if I'm the fool, nothing. Link to comment Share on other sites More sharing options...
HopsGuy Posted December 5, 2008 Share Posted December 5, 2008 But then, if you can identify those "greater fool" stocks, you can do well going short. (Done that before, too). When you get down to it, I've had the best success following the simple rule of "Identify the fool in the market. If you can't identify him, you're the fool" and doing either the opposite of what the fool does or, if I'm the fool, nothing. When I was a prop trader, QCOM was going crazy. I remember my friend shorted it just before earnings and lost 6 points on it, covering at $241. He still says that was one of his best trades ever. Anyway, one guy in the office was shorting that thing (and losing) all the way up. He finally said to the guy who placed his orders, "Cover it man. I'm all done with that stock." Upon hearing this, one of the old salts that rented space there, turned on his heel, walked back to his office and made a trade. He shorted only a few hundred shares and made about 70 points the next day. The only reason I knew he did it was because (for some reason) I was given administrative access to everyone's blotter. He didn't gloat. I went and asked him about it a week later and he said that it was a pure gamble, but he figured that when the other guy finally covered around $670 it was a nice example of capitulation. I checked my shelf and I have one two O'Neil books, but neither describes the "buy the good stocks/employ a trailing stop" strategy. I'm sure it's in one of those free books you get with an IBD subscription. I just read a section on identifying market bottoms. Link to comment Share on other sites More sharing options...
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