Salim,
I am not an expert investor, but what I hear about Wade Cooks technique sounds just like another form of value investing. Apparently, Wade Cook calls this technique "Rolling Stocks."
The way I interpret it, the technique works this way:
1. Through research and analysis of Stocks, an investor pinpoints several stocks that have a fairly predictable price range.
(As an example, XYZ stock whose price fluctuates between 1 and 3
dollars a share.)
2. When XYZ is at it 1 or even 2 dollars a share you buy.
3. When XYZ jumps back to 3 you sell.
It's simple value investing. You buy into a stock at it's low and wait for it to peak. This is not growth investing because you are
trying to find stocks whose prices fluctuate like this in a couple weeks or months. Growth investing assumes you'll hold on to the stock for the long term in hopes of the stocking hitting a long term peak.
For example, If you were growth investing in XYZ, you would hold onto
it for several years in hopes that XYZ would grow to a Share price above and beyond 3 dollars a share. The rolling stock idea is nothing new to me because that's what I've been doing before I even heard of Wade Cook. I value invest for short term (like Wade Cooks Rolling Stocks) and for the long or possibly short term (buying Novell at
$10 a share in hopes that it may regain it's high of 30 dollars a share)
The hard part about Rolling stock is identifying stocks to do this with. Once you get into it though, it's actually pretty easy to find
stocks like this that are cheap. Two that I've been doing this with are SEEQ and IMAT. SEEQ for example, has always fluctuated between
2 and 3 dollars a share. Sometimes it hits $4 and 3 years ago it hit
$5 dollars a share. But more likely than not, SEEQ always fluctuates between $2 and $3. These changes can occur within within a week sometimes. If you simply monitor SEEQ and other stocks like it, you simply repeat the steps described above and you can reap gains of 50%
or better. This can be done in very short periods of time. Wade seems to be selling this idea as some new investing technique calling it Rolling Stocks. I am not questioning his knowledge or success (he has done very well by employing this technique) It's just that I see it as simply value investing on the short term. Many Penny investors
do this all the time. OTC stock sre very risky, however, but ther are many with stable price range fluctuations. I could have done this with SEXI, but I want to hold onto it for growth. Unfortunately, SEXI
has recently dropped bellow it's stable range (It's been fluctuating between $2 and $4 consistently for several months. I waited for growth, however and it has since then dropped below $2 (Ouch!) If I value invested I would have sold when it hit $4 after buying it at $1.65. It actually peaked to $4 after buying it two days later! I could have sold and repeated the process every time it dropped to $2.
Instead, I'll have to wait and pray SEXI will regain it's high or higher price.
Wades system is nothing new, but I guess it's helpful for beginners.
Just watch out for those commission charges!
Bryan |
