Lesson # 44: excellent question, glen....please read this carefully:
* among the many trading/investing/timing "concepts" around, one I have never understood, is the one, where, some nice people actually want to believe, somehow, that, if stock XYZ is no longer a long buy, here, it must be a sale/short here, and if not a short here, it must be a long buy here, etc....but, it is crucial NEVER to think this...
logical, historical reasons: (for the Puts side) first, ALL issues have a "middle" stage, in between "after the intial fall", but before "they might base/set up as trading bounce buys again"...right ? the problem, as "the PSYCLE sm" sees it, (since I have viewed many thousands of charts, going back decades, and most people have not), is that, often,
a) with the Oil Svc. stocks here, for example, NONE of them are "cheap", at, still many times, their prices of just 1-2-years ago !!!!
b) "cheap", by "PSYCLE sm" definition, is VERY low, way off from recent/all-time highs, i.e., say, down from 40-60, to, say, 2 -10 a share....not just "recently down 20 or 30 % ", dig ?
c) sometimes, historically, after "parabolic wall st. loving highs" are corrected, these issues break down AGAIN (not a prediction here, just something you should know has been factually true many times, while lovers of that ind. group continue to try to buy them long, then often lose again)...in 1981, the Oil. Svc. issues fell, from, say 60, to 40, then had a small rally, then fell much more, to 10-20 area... and many fell to under 5., as we know....same with Techs, Golds, etc.
d) last, "PSYCLE sm" traders favor those issues which have the (hopefully) BEST reward/risk ratio/potential from here, and almost
NO stock, which is still up hundreds of percent from it's all-time lows, even after a correction, will outperform a properly timed issue, which is, at that time, near its' low now, from that time, right ?
which brings up the Oil Svc. issues, now....again, I am not being a smart-ass, but, GLM, was only 3.00, and VRC 5 or 6, two years ago (I really did have one friend in them, etc. then)....after it's predicted recent decline, it is still around 20.00, right ? NOT "cheap" at all....the same with most all other Oil Svc. issues....NONE are even remotely "cheap", from their lows, today...oh, and a last thought for now, whenever a group is in stage 5 or 6 in my "PSYCLE sm" (as the Oil Svcs. seem to be), after the first drop, inevitably, you hear "people who want to buy somehow", say, "but, Jim, their EARNINGS are still going to rise", and/or "their PE ratio is now cheaper/more attractive" am I right ? well, don't be fooled....first, most all issues will have to BASE first before rising, even of they do become S.T. buys again, at some point, (and none of thosehave a base yet anyway) and second, when/if their two moving averages begin to decline (as is the case with many Oil Svc. issues), any rises from here, are still going to run into resistance up there anyway, right ? so, again, why go klong this group, even for a pop ? when other groups are much better situated as pot. longs....neat, huh....
* so---in closing, why even look at these kinds of stocks, versus, say some Depressed Techs or Metals here, with close stops, or, eventually, the Asians after they bottom....dig ? remember, "PSYCLE sm" traders do NO "overnite guessing trading"....either it sets up properly or we don't touch them, in favor of other, better-patterned issues at that time...again, we are going to lose at times, but we win much more than other approaches, over time....with much less stress/pressure, and risk ?
* the key, is that the same basic things are always said/felt, about every group, each time that group enters each successive "PSYCLE sm" stage....it has always been this way, and always be that way, because, as taught in early Lessons here, human nature and physics never change
hope this helps....spread the word...I love this stuff....thanks again for the good question, glen...I appreciate it... |
