Tim, is it possible that we all spend too much time in contemplation? If the market climbs a "wall of worry", we have our own little section right here on the range.
The easy answer to your contemplation is to "sell down to the sleep point." I can't do that 'cause I always think things go up the moment I sell them. With NTAP, I sold half earlier in the week when it dropped...gave me some relief.
Another consideration is that, as you alluded to, the market does not always recognize the potential of our beloved stocks...otherwise, I would be a millionaire with Qualcomm, rather than a relative pauper. (Last December, I actually told my wife that we would be millionaires in October 2000...Ha!)
Research
Looking at Thompson, there was heavy selling pressure this morning coinciding with the drop at 1030 this morning. However, institutions were more than half the volume. [Enter CFLO at the ticker].
iw.thomsoninvest.net
If funds were window dressing this afternoon, it is rational to believe that the falling market pulled the price down two points. Then at the end, volume picked up and the price recovered a point. Look at the volume, on balance volume, stochastic, and money flow, all of which held up well at the end. Doesn't really look like a blow off top to me. askresearch.com
Pulling back for the long view askresearch.com , if we worry a bit about October, after the window dressing, we may expect a pullback. But how much. Our last big pullback was in July. Could we have such damage this close to an election? Don't know. As Greg says, if we all expect it to go up, it may go down.
In thinking about this problem, we ask ourselves, what is the correlation of the Naz and CFLO? bigcharts.com You can use the "printer friendly" function and print the Naz chart for reference. (Don't that make you sick that we have lost all August gains?) Then, go to "compare" on the left of the BigChart NazComp screen and enter CFLO...print out the result in "printer friendly" if you have a b&w printer like me.
Looking at the correlation, we can just about throw out the first month or two until Feb 2000. Correlation is good until we reach August when CFLO heads up quicker than the NAZ and in Sept continues the steep climb in the face of a dropping NAZ. (Perhaps you followed the stock enough to know this intuitively, but I had to look at it to get a feel. I have been in the stock only since you told us about it on the Range.) We do get an increase in slope at the very end of Sept which could presage a blowoff top. Will it wait until Oct?
Now the 64 dolla' question. Why would the stock suddenly move down either with or against the NAZ? Valuation? Downgrade? You have as good a handle on these aspects as anyone. IBD says the best reason for a stock to move up is that it making new highs. CFLO is about to reach the high made back in December.
How about fundamentals? Big Charts has some information behind the links above a CFLO chart. I think earnings are forecasted to be a gain over last quarter and a surprise is expected (oxymoron?). There is also some insider information at Big Charts. Pretty quick and dirty, but I'm running out of gas, here.
Analysis
So, now we take all these factors indicating bad happenings and assign each a probability and it doesn't mean anything...but it's fun to try. I'll just list a few and let you do the probability if you want to. My numbers are in bold.
1. Market soon fail to recognize value?
Probability 1______________50_______________100
2. Blow off top before end of quarter?
Probability 1_____25_________50_______________100
3. Market pullback October 1st?
Probability 1______________50____________90___100
4. CFLO correlate with down market after October 1st?
Probability 1______________50_______________100
5. Sept insider selling future drag?
Probability 1______25________50_______________100
6. CFLO downgrade for valuation or whatever?
Probability 1______25________50_______________100
7. Chances you'll ask me what time it is and I'll tell you how to build a watch?
Probability 1______________50_______________100
Average probability of something bad, if all these had equal weight, which they don't? 265% / 6 = 44%. Less than half.
What Now?
Just a few things you already know, Tim, as a reminder for tomorrow.
1. Stick with your gut. AND, as Greg says, don't let a gain turn into a loss.
2. Watch the stock and the market in the morning. Try to wait out the first 30-45 min. If stock goes south on higher volume, somebody doesn't like it, dump... Dropping on lower volume, it may just be falling with the market, still may be no reason to keep it. Dropping against the market, may be breaking down correlation or losing market recognition as you fear.
3. If we don't get a drop in the morning, I still think we will have to continue to watch it like a hawk. Sell at any point you feel the need. Or, set hard stops if you have to leave for an extended period.
4. Today's resistance was 160. If we go up and penetrate, I would be satisfied to bail at the 162-165 area. I do not think I will hold this or any other questionable stock over until Monday.
Hey, Tim, that was fun!... even if it took awhile. Made me think about it too. Glad you asked. Hope I haven't bored you. Finally, hope some of it was useful.
Regards,
Joe K........ |
