<< RE: IOM pattern question?
Hi trading pros,
I am bit baffled by the recent trading pattern of IOM. I am not expert in trading and one of those buy and hold longs. >>
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Current stock prices are a complex equation consisting of past fundamentals, future fundamentals, fear and greed.
In the LONG TERM fundamentals rule, in the SHORT TERM fear & greed
rule.
Therefore, if you are a day trader, fundamentals mean little. You cannot predict price movements day for day based on studying balance
sheets. You trade based on momentum indicators, which really are
measures of fear and greed.
long term investors invest based on earnings strength and relative
value of the earning wrt others in the industry (using PEs, whatever)
They ignore short term fluctuations (since it is a chaotic model
anyway) and invest on 'value'.
This is important: IN THE LONG TERM, A STOCK PRICE WILL EVENTUALLY
REFLECT THE FUNDAMENTALS. This fact cannot be changed.
YOUR PROBLEMS ARE TWOFOLD:
(1) You claim you are a long term investor, but you are watching this
stock like a short term trader. (This is what most people on this
board do.)
(2) You buy and hold, but you are not selling when the fundamentals change! This is a BAD, BAD mistake. Nobody who owns this stock now
would buy this stock as a new investment if they had a chance. NOBODY.
2 years ago, would you have bought IOM if they where reporting losses?
uncertain future? had lawsuits? CEO leaves? Would mutual funds buy
this stock new under those conditions?
***
THE GOLDEN RULE:
Long term investors must sell when fundamentals change, day traders
must sell when momentum changes.
***
As long as you keep trading with your current mindsets, you will NOT be successful in the market.
Good luck!
kp |
