To: Gottfried who wrote (30801 ) 6/2/1999 9:42:00 PM From: Sun Tzu Respond to
You're welcome. Since I described the investor perspective (myown of course) of AMAT during last year, I feel obliged to also talk about the trader position as well. As a trader you should not have bought AMAT in 20s. This would have saved you a lot of money and antacids <g>. The up trends were unclear, the support shaky, and no catalyst for the up side was in sight. In mid October you could have argued that there was counter trend signals in sight, but given the market's mood, you would have needed balls of steel to buy into the sell off. What is more, most good trades were stocks that made higher lows in October compared to September, whereas AMAT had lower lows [I remember this because I was looking at AMAT at the time and on the balance it did not look as positive as some other stocks]. Once AMAT broke through 30, there was sufficient reason to buy it. The problem (for me anyway) was that it broke out so strongly, that a 5%~10% pull back was expected. Given that the trading upside target was 35~40, the $2.5 expected pull back was big enough to wait for. But AMAT ran up and never looked back. So it was an even call to buy it and risk a loss or go with other stocks. Assuming you were smarter than I and bought it somewhere in mid 30s, you should have sold it in early March. If it was me, I would have sold it around $60 in the 3rd or 4th day after the gap down. This would not have been the best exit point, but I'd rather take a trading loss right away. BTW, if I had bought AMAT as an investment last September and it had droped from 25 to 18 (i.e. 30% drop) I would not have sold it. But I probably would have sold it on the first or second day of the drop (i.e. even sooner than my trading sell). This is because I'd have trippled my money in less than 1/3 of my expectations, and that is good enough reason to sell on a pull back and watch a little. Over all, you should be wary of a stock that does not behave as you expect it to, regardless if the unexpected behavior is making you extra money.
