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Technology Stocks : TLAB info?
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To: Chuzzlewit who wrote (2302)3/27/1998 2:55:00 AM
From: craig crawford  Read Replies (1) of 7342
 
Do you claim that no one can make successful short-term bets on stock prices?

Do you not subscribe to the notion that you can make money by catching the crowd leaning too far one way? For instance, why can't you make a short-term bet that a stock is going higher because there is extreme bearish sentiment and a heavy short position?

My view is that the market for stock prices is all about supply and demand. I don't see why you can't predict short-term moves in prices by successfully gauging the shifts in supply and demand. These short-terms shifts in supply and demand don't necessarily have to have anything to do with changing fundamentals of a company's business prospects.

For example, let's say you have a high flyer like YHOO. What is wrong with making a calculated bet that shorters have recklessly piled into a stock that is commonly believed to be "overvalued". Knowing that these shares have to be bought back in the future, and knowing that many shorts are almost at their breaking point, why couldn't you place a short-term bet that there would be a short squeeze which would drive it higher?

I'll give you another example using TA. Many traders except the notion that when a stock goes steeply parabolic it is unsustainable for an extended period of time. In other words, if a stock climbs a significant percentage in a very short time period, I would argue that there is a good chance that it will come back down sharply as well. An exception to this is when stocks come off of a bottom. Lot's of times they hold up pretty well even after a sustained move to the upside. Aside from the bottom exception, isn't it fair to assume that lot's of times these parabolic moves are a result of emotions at work rather than fundamentals? The simple fact is the investing public can get severly emotional to either extreme, irrespective of the fundamentals. Why can't a trader sense when this occurs and profit in the short-term?
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