From briefing.com -
(DAYTRADER): Remember the cancer-cure stocks? What about the cable-modem makers and wearable computer companies? If you have been trading the secondary online brokerage plays this week and don't recognize these references, or ticker symbols such as XYBR, SEVL BLTI, GIII, or EGHT, then this story is meant for you. After each and every run-up in micro-cap theme stocks, Briefing.com is deluged with e-mails asking our opinion on some hype company's fundamentals. No kidding: We receive questions from readers asking if they should continue to hold a micro-cap momentum play that had run-up 300% before the individual took the shares in and is currently trading 25%-40% below the purchase price. As Briefing.com has stated numerous times in this column, the only "investors" who hold onto these stocks for the long-term are, simply put: those poor souls who just don't no any better. No one has ever explained the rules of the game. (See November 17 Story). We will make this short and sweet: Micro-cap, secondary plays don't trade on fundamentals. Momentum is their one and only master. Although the stocks don't fall apart nearly as quickly as they run up, it usually takes less than three months for the vast majority of them to cough up 75% or more of their gains. But even for the experienced traders, the rules have changed a bit. Over the past several months, online brokers have made drastic revisions to their policies on shorting stocks, which means the latest round of momentum highflyers may fall from the clouds at a much greater velocity that their predecessors, due to a lack of short squeezes. Sure, these stocks may one day rise again, but in most cases they never come close to retaking their highs. For examples of just what to expect from stocks such as NHMY, SIEB and the others, take a glance at the following graphs: GIII ---SEVL---HCOM |
