Back when I was a pleb, I rode a stock from $45 to $2. It was during the dot bomb burst and those types of occurrences were in abundance. The original thesis behind the trade was a “chart, breakout, above some homosexual neckline.” This fucking stock– single handedly– destroyed my business and blew up my personal account beyond repair.
It threw my career into a tailspin and sullied my reputation at the firm. My production levels plunged from $100k per month to $20k, aka an ordinary Joe on Wall Street. Truth be told, if you’re not banking $500k on Wall, you’re wasting your time. Get to work.
Back to my catastrophe. I allowed a “technical” trade become fundamental. Then I convinced myself not to sell because “it was already too cheap.” Well, the cheap got cheaper, then it got perverse. The same could be said about those who chased coal down the sewer pipe.
How do you avoid such things?
The answer is simple: don’t buy stocks in industries under duress.
My blow up occurred in tech. Back then, their balance sheets were impaired and credit got tight, real tight, at the very worst time. Fast forward to today, coal, natural gas, alternative energy, solar and steel are all under pressure. Before buying a stock, know the balance sheet and avoid any name that might have an issue raising money.
Sure, CLF looks attractive and the stock is “real cheap.” But their business is intertwined with the very worst global de-growth has to offer. With a market trading at 13x, you have no excuses for chasing shit down the rabbit hole. There are countless names, trading at reasonable valuations, worth investment. Also, I tend to avoid names that have fucked up earnings reports, like FIO, DELL, HPQ.
Why gamble on a loser, when there are fucking winners out there? An analogy of sorts for iBankCoin versus the competition.
BONUS: Top 15 technically ranked stocks by The PPT.