What If Things Get Better?
By James J. Cramer
Originally posted at 12:27 PM ET 10/24/00 on
RealMoney.com
Let's say you are short
Applied Materials
(AMAT:Nasdaq - news).
You are short it because
you think the semi cycle
has turned down. That's an honest assumption, judging
from what the companies are saying. It doesn't sound
like that many of them are eager to place bigger and
bigger orders for semi equipment, which is what Applied
Materials makes.
Then you come in Monday and you see the semis ramp.
Your case against Applied Materials has been knocked
a bit because of the positive action in the group. What
do you do? If you are like most amateurs that Herb and
Adam and I are discussing in Columnist Conversation,
you panic and cover.
And then you come in Tuesday and you see the action
off National Semiconductor (NSM:NYSE - news) and
you just want to scream. Applied Materials is now giving
up what it made. Just like that. And if you covered
Monday, you are a loser.
A professional short-seller might say "Hey, I can take
the pain" of a Monday. Maybe even put a little more out.
But that doesn't mean even the pros are able to handle
too much upside. Applied Materials has been cut in half,
at a certain point it will attract buyers simply on price.
This combination of price buyers and short coverers
bedevils those with the discipline to see the negatives
through.
Provided the negatives stay negative. Again, if I am an
Applied Materials sufferer -- I am not -- I might be
thinking to myself, this stock reflects a lot of negativity,
but what if DRAM pricing turns up? What if the cycle
turns? What if things get better?
Ahh, that's the real rub. What if things get better. Right
now, some people think that might be the case. Those
people may not be powerful enough today in the
semi-equipment stocks but they are out in full force in
the brokerage, cosmetic and bank stocks.
They are creating a friendly environment, a home-field
advantage, if you will, for the bulls. That's why I would
take the bulls in any even up wager. |
