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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Rick Storm who wrote (12614)	1/3/2002 2:47:02 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 74559

re: the tops of the ranges are more difficult: My method depends on picking the tops and bottoms only very approximately. I don't need precision, just getting in the ballpark. I started buying NTAP LEAPs, when the stock hit 13. It bottomed at 6. But I did well (so far), because I had bought in increments all the way down, and then sold my higher-cost lots on the rebound. Doing everything in increments is an important way to "idiot-proof" my investing. I only plan large purchases and sells at a specific price, when the chart is showing strong resistance and support lines at that point (like 14 for NEM). As far as selling: Investor A buys a stock at 10, sells it at 15 a year later, and the stock stays at 15 for the following year. Investor B buys a stock at 10, sells it at 15 a year later, and the stock goes to 100 over the following year. Objectively, these two investors had the same returns, and their investing methods are equal, judging by the results. But they are likely to feel very differently about themselves: Investor A will feel a lot more successfull than B. B will be asking himself what he did wrong, how he can change his methods so he doesn't "let the big one get away". Since I know I'm not smart enough to pick the exact top (to sell at), my realistic choices are: sell too early, or sell too late. Selling early is much preferable. When I buy, I'll try to decide the longterm valuation range. So, for instance, the LT PE range for CMH (housing stock) is 10-20. I bought in increments in 2000 when it was at a PE around 10, and sold in 2001 as it approached a PE of 20. And am now shorting it (it's kept going up), as I see any PE over 20 as unsustainable. Could it go to a PE of 30? Yes, anything's possible. But it isn't likely (based on the LT track record), and a PE of 30 would represent a Bubble in that sector, and a further shorting opportunity.