Hello, dppl ... on the behavior of PSFT and institutional darlings
Without looking at any charts to bias my thoughts, I find several factors are at play for PSFT. First, it's an institutional darling ... as of April about 2/3 of the stock was held by institutions. Recall I said when stocks have churned and the profits have come out, the institutions will return to support their darlings. When they hold a majority of the shares, the stock never falls at once ... it recovers over and over. Second, PSFT reported good earnings and its rate of growth over the previous quarter supports its PE of 100. The market gains recorded in recent sessions have many investors worried that if they don't jump back in now they will miss the next major up move. Such herd-like behavior has been a hallmark of tech investing and helps to explain the violent swings in both directions. Third, shorts have created their own DST. PSFT has tested it highs in the low 70's and met resistance several times. In this market climate the shorts have entered ... the short interest is probably high and when it exceeds 30 percent, the potential for a squeeze is likely. So while PSFT has tanked to 60-57, hopeful shorts expect the stock to fall flat on its face and didn't cover but shorted more. Now the institutions come roaring back in, the shorts are covering and hence ... DST. Why do you suppose that PSFT gapped up on Friday?? Shorts in a panic to cover when the stock closed over 70 on Thursday, obvious stop at 72-73. Look at the current short interest on PSFT, and then you'll have an estimate how long the stock can hold. And since the stock has recovered so quickly, there will be little overhead supply to bring the stock down. Having said this ... the chart will reflect what I said later. Should have thought this thru before, not much different than CUBE and IOMG whose rise and fall I've read accurately for months.
PSFT, whether Friday's gap up on heavy volume is a breakway gap or exhaustion gap remains to be seen over the next several market days. The current short interest is key. And when a stock goes thru resistance, one doesn't know the next level until it is met. But just as longs should not panic in a down market, shorts should not panic in an up market. Charts reflect market psychology, but always after-the-fact. One must always read the current dynamics with the chart.
These thoughts apply to institutional darlings across the board ...
Let me know your thoughts, dppl, and whether you feel the need for damage repair strategies. btw, we have to stop meeting like this over the weekend! |
