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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Eric P who wrote (8052)	4/27/2000 7:51:00 PM
From: Dave O.	Read Replies (1) \| Respond to of 18137

< Finally, you short the stock when it reaches the unbelievable price of $200 per share ... the irrational purchases of droves of market idiots cause the stock to go still higher. By the time the stock reaches $300, you scream "UNCLE" and bail out of you short position at a huge loss. > Eric, Although I know you're just using an example above with MSTR, that is the kind of play that could wipe a trader out. But ... if one shorts a stock like MSTR intra-day there was money to be made. I like to watch incredibly overextended stocks and when they seem to hesitate after a big runup intra-day, then is the time to jump on them. Just looking back at some trades ... I shorted MSTR at 75 on 10/6 last year. In January I shorted again at 230 and at 254. All these trades were profitable and all closed out by the end of the day. Obviously I didn't make the big kill by nailing it at the top and watching it tank (brought on by restatement on past numbers). But if one shorted at 200 and sat there until 300 they'd have only themselves to blame ... a trader who lets something move 50% against them won't make it long term. It was just too volatile of a stock to take home overnight. Dave

To: Eric P who wrote (8052)	4/27/2000 8:08:00 PM
From: Mark Davis	Respond to of 18137

What you describe is actually what happened to many of the blowups in the Nasdaq. At some point , rational players , including market makers, simply gave up trying to profit from the short side, since the risk was enormous and the strategy was not working for long periods. This gave rise to the 'kiting' of many a stock price. No natural sellers, no one to take a short position, and a few loonies at the margin buying and holding. Of such things are bubbles made. Since this can't last indefinitely (only seems to), things fell apart for many a name. Massive insider selling also appears to have been a catalyst. So yes, it's hard to take a long term short position since the extent of the madness is quite difficult to measure. Not to pass judgement on the stock, but the AVNX Gilder play looks like it's burning many a short as we speak.

To: Eric P who wrote (8052)	4/27/2000 8:42:00 PM
From: Threei	Respond to of 18137

Eric, your description brings on the ghosts of KTEL, BAMM, MZON, NAVR etc... Incredible run-ups burning premature shorts. And the more they short the higher and faster stock goes. William F. Eng, Trading Rules II: "Beware of shorting worthless stocks: do not forget that dust and straw and feathers, things with neither weight nor value in them, rise soonest and most easily". Of course it all depends on timing and time frame but the major underlying reason for losses in this kind of situations remains the same: forming an opinion and stubborn holding on it. Opinion is fancy thing investor could afford to have (and even he better would be careful). Trader just follows and reacts, and instead of forming his own opinion he observes how other's opinions impact the market. The shorter timeframe of trader is the more this principle applies. Recalling loud KTEL discussions during its run to $80 and looking at what happened then one could see that all shorters siting reasons for KTEL to drop were right and all the hypsters proving that it was a gem were wrong... Still shorters lost, longs won (well, not all of them of course, but those who started the hype obviously sold even before eventual top). Which brings one more conclusion: to be right and to be in the money not nesessary go together... market works in not that simple way. I realize that in different forms we have said that many times before... but your post just provoked repeating :) Vadym