I sold out of the remainder of my long-term WWE position back in early-March, discussed in this blog post, after my original bull long-term thesis in this post when the stock had an $8-handle back in 2012.
The stock is down a cool 45% this morning, nearly twenty points down from where I sold it (and it is only a $10 stock).
I, of course, had no sense that the stock would subsequently get shellacked to this extent after I sold it.
However, this type of price action is certainly a risk many investors/traders do not consider when their holdings may develop an unsustainably-steep trend (the rubber band snapping back effect).
All in all, there are two lessons worth noting from the WWE long-term investment:
- Even for investments, beyond trades, you should be consistently evaluating the original thesis for making your bet, including technicals. Here, the stock worked through an abnormally-steep angle of ascent and garnered a wildly bullish following along the way. Such an angle was simply too steep, abnormal, and, in effect, unhealthy to persist (see my post above where I sold the stock and outlined the technicals/sentiment).
- The only permanence in life is impermanence–You should be willing to part with a long-term investment when you deem it to be objectively correct, regardless of the buy-and-hold-forever philosophy which has caused far more damage than many would care to admit.