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Technology Stocks : IFMX - Investment Discussion -- Ignore unavailable to you. Want to Upgrade?

To: Raven McCloud who wrote (10998)	5/29/1998 8:53:00 AM
From: RDH	Respond to of 14631

Michael, for what it's worth I think this is a successful strategy for shorting: Set a cover target price on the up and down side before shorting. Example: Juvenile Keepsakes (NYSE:JUNK) seems unbelievably overvalued at its current price of $25. After research I determine a fair price for it is $10. I decide to short when it stops going up and it reverses course. I will cover if it continues to go up greater than 20%. If it goes down I will wait until it has gone down at least 20%, and then continue to wait to cover until it has clearly changed direction from going down to coming back up. It goes up to 26, then 27 down 26, up to 28 down to 27 to 26 to 27 to 25 3/4. It looks like me that it is coming back down from 28 (based on stock movement and overall market movement and the movement of stocks in the same industry). I short at 25 3/4 and hold my position until 30 7/8 or if it starts coming back up after dropping below 20 5/8. Realize this approach doesn't protect one from good news that comes out during market close, so one needs to be particularly cautious during earnings. This approach requires fundamental analysis so that your picks are correct more than 50% of the time. This requires real detachment, for it hurts to cover a short after it has gone up. But in the long run the losses incurred will hopefully get set off by the gains (which will occur if you pick good shorts and have instances of some of your picks continuing to drop below your 20% target). - RDH.