To: Mike 2.0 who wrote (2168 ) 1/14/1999 11:09:00 AM From: michael r potter Read Replies (3) | Respond to
O.T. Since the 1-12-99 "short" EBAY is down $56 per sh. or 19.2% and UBID is down $18 or16% despite being up today. One should never short a stock just because one feels it is "ridiculously priced". Note, the stocks shorted were not CMGI or YHOO. Technical Analysis is a must. EBAY and UBID each peaked in Dec. Both were exhibiting a screaming technical divergence. While the internets were on fire the previous week, these two were off their highs and going nowhere. It appeared that the market was about to correct. If these stocks could not go up on a strong market and their industry group on fire, what would they do in a correction or flat market? The market just provided the answer with the highest probability going for it. One would now move a stop below the short price. These stocks have had their day and are in real trouble. If they did a secondary, these stocks would collapse further as the market is voting with its pocketbook that it doesn't even want the shares available now and has to lower prices to meet stock for sale. With longs, after thousands of trades, my emotions and intellect are in synch. With shorts, I have done so few, that as soon as I get in, my emotions and intellect disconnect. This exercise is an effort to get used to the process further so that I can let the intellect carry forward and do more real shorts without emotional interference. Having the emotional and intellectual capacity to hedge longs by shorting will be a real plus going forward. It would have been of substantial benefit last fall, as being all long an aggressive account was not ideal. One could just sell out, but if one has large positions with a very low cost basis, hedging is a much more cost effective way to go. Shorting, done correctly, is vastly underutilized and an important tool. Mike
