<<that you are thinking of buying "when they dip" to sox = 250 implies a generally optimistic outlook>>
Greg,
I wasn't very clear actually, and it's difficult for me to put my strategy in writing as I am looking at a number of things. SOX dipping below 250 isn't very high on my list of measures, to be honest, but if the pessimistic scenario I'm prepared for happens, it will certainly dip a bit more below that; it's more of a measure that the pessimistic scenario is, in fact, playing out. [There's also the more optimistic scenario, which is far from ruled out, that says we are already at/near the bottom... another post.]
I know from experience that when 'blood' starts to flow, I won't want to put a dime into these stocks, and I have to have a set of metrics that more-or-less objectively tell me to go against the pessimism. These include: price/book near cycle lows, price/cf (I'm leery of price/sales), analyst downgrades, deteriorating volume, etc. This strategy has worked through the last couple of cycles.
However, experience tells me that I cannot call the bottom of anything, that I get too emotional around cycle tops and bottoms, that there are always sucker rallies that can ruin buying on dips, and that these are high risk investments. So when I go long, I'll go long in pieces (thirds usually), and not initially risk margin, and I'll be less kind to dogs and englishmen than I should <g>.
F. |
