. . . On Momentum Plays. . .
If Only I'd Held,
There are parties shorting ZNDT so that they can then turn long and afford more shares. Some people never go long on a stock, without first going short. I have conversed with two such parties, that fought to keep it under $10, so they can buy more shares. And yes, it is a good valuation play here. . . very good in fact.
But Buffet or not, when it comes to micro-floaters, the game played is one of manipulation. I can see ZNDT doubling in a single day, when everyone gets on the same page.
And I maintain that ADSP was simply a good trade on a day everyone knew the market makers were on vacation and switched most every issue to auto-trading computers. By the time the few remaining live MMs could "see" what was going on, the damage had been done. Exactly the same as BAMM, SHRP and GERN last year for Day-After-Thanksgiving Mania Day. Just good aggressive trading. . . I was surprised there were not more. . . like SFTW and LANV.
As for your conspiracy theory that someone is "out to get" Anthony or Joe to "wipe 'em out", it sounds rather farfetched don't you think? To go to the trouble to "set them up", then get the Ariel company to issue a dubious news story, then hire Joe Kernan to announce the story on the air, and be certain that the targets of the conspiracy would bite. . . .well. . .it takes one enormous stretch of the imagination, wouldn't you agree?
As I said before, a news driven Wireless stock with ties to Red Hat Linux, getting CNBC coverage with Joe Kernan to read the news. . . .that is the hat-trick in the daytrading world. That is the formula for a stock to quadruple right there. Now add to that the
"Day-After-Thanksgiving Effect" [the most volatile trading day of the year, historically] and you are looking at a 10+ bagger over 2 days. . . which is exactly what it was.
We must factor in that momentum traders, whether they be daytraders, swing traders or blind sheep following some guru. . . none of them are the least bit concerned with whether particular news is true or not. . . or whether the company "deserves" to get a higher valuation. This is no contest or survey. . . this is about "PERCEIVED" value and MOMENTUM. Nothing more.
Daytraders, Swing Traders and Blind Sheep buy or short-sell on momentum. And in the case of ADSP, the news fueled the momentum on about a half-dozen ocassions. And frankly, if the markets do not decline heavily on Monday, and Ariel gets the tiniest news item that puts them in a good light. . .I think the thing could still go to $70 or more easily. . . however, I believe the entire broader market will head lower sharply come Monday. . . that is my bet anyway.
Again, nobody is interested in the truth, when it comes to momentum trading. The longs don't want to hear that the company is not worth the new valuation any more than the shorts want to hear that the company is indeed worth the new valuation. It is instead all about volatility . . manipulation and volatility.
The longs are enjoying the present volatility and news that propels ADSP 'to the moon.' And the shorts are scrambling to find some loophole in the news, in order to exploit it to get some bad news spin going on the company, thus turning the tables on the momentum. . . and by doing so, they could care less whether the company truly is worthy of a $30 valuation or not. . . they just want the stock to go back down under $13 before the 3 day settlement expires on their short positions. . . [though in the case of many, it is too late. . . .the margin call requires payment regardless of the position or current price and no payment means liquidation and freezing of your account. . . and from what I am told, many margin calls went out at $54!!!]
So who is worse? The longs taking a stock that might have a $20 valuation to $40? Or the shorts taking it to $10? Answer: both simply want to make money, and in the short term, neither care in the least whether the stock is valued correctly or not. . . . manipulate the stock in the direction of your favor and break through any resistance to cause maximum volatility. . .that is how the Pump & Dumpers do it .. . . .and that is how the Bash & Cashers do it.
Longs say,"get that price up. . .jump on it. . .going to the moon. . . squeeze it. . .run it up . . . Yeehaaw."
Shorts say, "flying pig. . . .build a wall. . .box it in. . .drive it down. . . sinking like the titanic. . . oh, the humanity. . . .die sucker."
Bottom line: There is no difference! Everyone is just out to make as much money as they can with their own methods of trading. . . or in some cases, their own methods of stock manipulation.
And here is where it gets interesting. . . .
Daytraders are mostly out of ADSP here. . . most are simply scalpers in it for a matter of seconds or minutes only. Swing Traders may still have positions, but have already banked most their profits. So who is left?
Those holding the bag after any stock has completed its run are the "greater fools." That's it. Suddenly the stock has a new cast of investors, whether they intended on being investors or not. The momentum is gone and now everyone is talking "valuation". . . as though that were the reason for even a single point of the move.
Tony is now feverishly trying to show that ADSP is overvalued. You can't blame him for that. Similarly, you are trying to show that ZNDT is undervalued . . also a noble cause. At this point, neither of you are considered daytraders or swing traders, because they don't consider valuation. Rather you are both to be considered position players or long term investors [long or short]. . . and valuation plays to investors are great. . . we love to take positions in stocks based on improper valuation.
However, don't "expect" momentum to continue to move a stock based on an improper valuation one way or another. Because unless we are talking about a big stock like GM or XON or IBM. . .there is just not an audience of investors out there interested enough in the valuation of either ADSP or ZNDT. So the key from this point on is patience.
And patience is no doubt what Buffetology teaches. When I bought PLCOP at 0.375, I knew it was going to take some serious time before others would notice how undervalued it was. I didn't expect it to take a year and a half, however. Now it is a 10 bagger, and with the recent German IPO and the 6:1 conversion less than a month away, it is finally being considered to be greatly undervalued. .
My point is this. . .these stocks can sit there being greatly undervalued month after month after month. . . and the only time it ever starts back toward where it really should be selling. . .toward its true valuation. . . is when it is hit with momentum.
When new traders come along and wish to sifon off the top, as Tokyo Joe likes to do. . . the momentum then attracts investors. . . the investors help to give it volume . . .the volume attracts the media . . the media attracts more short-term players, who attract more investors. . . and suddenly the stock is moving once again.
So. . .this is all a very complicated game. . .and there are many styles of investing and trading, both long and short. . . but unless we see HOW they are intertwined and even dependent upon one another, we will continue to be baffled by stocks when they make big moves one way or another.
So by studying such relationships we can get a better handle on such moves. . . and not have to back peddle to figure out why a stock did this or that. Thus making us better "traders", not just investors.
Rande Is |
