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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: MJ who wrote (4562)	2/3/2005 12:54:58 AM
From: Walkingshadow	Respond to of 8752

Don't get me wrong, I don't always ignore stories. I just take them with a big, big grain of salt. There's more great stories out there than I've had hot dinners, but the vast majority of these are going nowhere in a hurry. And conversely, sometimes there is no news or the story would bore you to tears, but the mo-mo crowd jumps in anyway and has a feeding frenzy. TZOO was a pretty dramatic example of that last year. I remember TZOO trading at about $4 or $5 a share last April, then the volume suddenly surging 5-fold, 8-fold, or more for no reason, no news at all, day after day. The volume surge just wouldn't quit. 139.142.147.218 The CEO was interviewed, and said he had no idea why traders were so interested in the stock suddenly, but that it made him nervous and he wished they'd just leave him alone. Now of course, we can see why that happened---the stock was heavily shorted, and easily manipulated because the trading float was small. Just the thing for the mo-mo crowd, who wouldn't know a "story" if it hit them in the face. So the squeezed the hell out of the shorts again and again. As I just posted to Jill, generally a "great story" itself is no reason to buy a stock. There has to be something else for me to get interested, and almost always the missing ingredient is my judgement that there is or will be interest from the momentum traders to drive up (or down) stock prices. Or something similar, like an impending short squeeze in a highly shorted stock. Sometimes, I buy a story if I know something that leads me to believe there will be news, but this applies only to stocks that are heavily news-driven (and so, momentum driven). Worse, I have found that sometimes if you know too much about a stock, it clouds your judgement of the things the chart and technicals may be clearly saying. In other words, it leads to bias. I try to maintain a sort of "market-neutral" bias. I really don't care what direction the market (or any sector or stock) is going. I just want to figure out what direction that might be, then go long or short (or leave it alone) accordingly. When you learn about a stock, particularly a story, you unavoidably begin to root for the stock, because you want to be right, you want the market to vindicate you and tell you how brilliant you are that you saw it coming (and of course, then you can brag to your friends or post it on threads and so forth). That, in turn, constitutes the fast-track to some very expensive mistakes in my experience. It's even worse if the market agrees with you, and the trade works out. This merely encourages that sort of thinking, and sets you up for the kill. In short, the trend is your friend, the story is your foe. T