Jeff,
I think your concern is valid. When you miss out on 100% of the move but still make a 70% profit, you could be doing better.
Obviously the conservative way to do it is to research the undervalued stocks and buy when they are down and out of favor. But it is a whole lot easier to find an internet play, and get in for the ride.
There is a definite pattern to these moves, and I have consistently found that:
#1. People sell way to soon. [Investor psychology---fear and greed].
#2. Before the stock begins a major retreat, the volume increase begins to slow, and ultimately decline. [Look at the recent moves of CFON and KTEL]
#3. A level trading range is established before a retreat. The stock does not drop back down the next day.
So IMO, it is best to exit in steps; ie sell 1/3, 1/3, 1/3. When the stock surprises you by rising another 100%, you still participate; if the worst happens and it breaks all patterns of investor psychology, you still do not lose.
I can tell about my experience with CFON. During the the last rise from 2 3/4 to 15, I bought at 6 and 7 and sold at 10 for a three thousand dollar profit. The next day the stock traded at 15 or 16. And despite volatility, it traded around 14 for another week. Due to fear of losing back my gains, I left at least another 100% on the table. And CFON had NO FUNDAMENTALS! This stock does.
There is definite logic to the phrase, "Cut your losses short, but let your profits ride".
Good luck,
Jeff |
