JZG, I'm not really sure how best to respond to you. Retracement won't hurt this stock. A fall from Monday's $71 high to around $63 (20-day exponential moving average and a 10% drop) would be entirely consistent with this stock's chart. But to drop all the way to $50, a 30% loss? I think that would shake some of the long-timers and could affect the psychology of supply and demand, which, after all, IS the market.
Do institutions behave irrationally? From our viewpoint, yes. In recent 1 to 3 day panic selloffs, it's been the institutions leading the way, not the individual investors. And when recovery follows so quickly, institutional selling does seem 'knee-jerk' in character. Irrational from the institutions' point of view? Probably not. You try to manage hundreds of millions of dollars without the benefit of hindsight. Someday the market won't bounce back so easily. Protection of profits - fiduciary responsibility - is an awesome burden. I'd hate to sit there some day, like those guys margining on the Russian market last year [Long-Term Capital Management Fund?], and think 'I should have sold when I had the chance.'
"yet another chance to profit from the irrational behavior of institutions." ? Yes, I suppose so. Overselling by anyone creates a buying/profit opportunity. Even for PMCS. Only as long, though, as the 'bargain-hunting' mentality remains intact.
Now to Merrill Lynch and other 'Strong Buy' brokerages. They seem to cause market 'blips', but not usually long-term effects. There are some exceptions. Tom Kerlach (then at ML) seemed to really damage semiconductors with his negative prognoses. And after Prudential's Ralph Acampura said one noontime on CNBC that the bull market was finished, we had some rough going for a month or so.
In general, broker opinion changes seem to be lagging, not leading, indicators. However, then you say: "To me when 30,000 brokers get on the phone with the "idea du jour" and the stock move south, it is likely we are not going higher in the near term." How are you applying this to PMCS? We haven't had two consecutive down days at Close since June 25. The uptrend is still strongly intact. Where do you see "the stock move south"? That puzzles me. |
