Beliefs Reconfirmed
Ever since I was a kid, I was interested in building and perfecting various systems and methodologies (can you say I was a geek <G>). People sometimes think that I am too opinionated and never want to lose an argument. This is untrue, because the desire to perfect a belief system means that you have to constantly question it and be willing to change it. My "stubbornness" is more due to a confidence due to constant re-evaluation than inflexibility.
Two or three nights ago I was looking at the chart of LEVL. It was screaming at me that the stock has gone up on hopes of take over and that now those hopes are fading and it is headed south. I wondered if I should short it, but decided against it since I like the company and hoped to buy it later on.
Tonight I was questioning my approach to investing/trading. I thought to myself that I'd never be a true trader because I am unwilling to turn against stocks that I like (or buy the ones I dislike) even when I know that they are moving the other way. For example, even though I felt that the market was toppy and that AMAT is fully priced, I still did not short it at 70, and now it stands at 57. Similarly I did not short TDFX as it slided from mid 20s to 11, because I like the company. So tonight I was questioning this "false" loyalty of mine.
I took a look at LEVL again. Today it had gapped down and dropped another $5 to 27, it had been 36 two days ago when I was thinking of shorting it. Then I read the new clip. After hours, Intel said they are buying out LEVL for $48. The stock is up almost 20 on Instinet. My approach just got confirmed :).
BTW, there were signs that today's LEVL action was a false break down in price. The most important of those signs was the option market. On the day that the stock was collapsing, there was almost no put buying. But there were a lot of calls traded. Most notably, the March 35, 40, and 45 calls that expire in a few days and were 30%, 48%, and 67% out of money traded 345, 553, and 101 contracts. This is a 100,000 shares in hope of 50% appreciation in 2 weeks! Someone knew.
I wish I could monitor the market better. But my scans give me too many leads and I can't check them all out :(
Sun Tzu |
