This isn’t rocket science. Every day some of you astound me with your impertinent stupidity. I am going to teach you the only lesson you will ever need to learn on Wall Street. Are you ready?
STOCKS AT NEW HIGHS TEND TO CONTINUE TO MAKE NEW HIGHS.
While it’s true, we all like to buy the underdog, in the hopes of catching lightening in a bottle: the 52 week high list is where the real money will be made. There’s a reason why those stocks aren’t at new 52 week highs: they suck.
YELP was at a new high when I bought it and now I am +40% in two days.
Stock prices are fueled by earnings. The earnings are extrapolated, taking the macro environment into account, and a multiple is affixed by investors. We are guided by analysts, who in large part are guided by us. They feed the mob what they like to eat.
When buying a stock at new highs, try to figure out what its earnings might be in a year, maybe two. Take a multiple or FPE that is average for its industry and set your price target. Naturally, this doesn’t apply to swing traders or the vagrant sort of day trader.
Price targets need to be justified, so the unwashed public can buy in. All too often these targets and rationale are ridiculous. Case in point: the dot com bubble. However, the gist of the dot com fervor was correct, was it not?
Look at AMZN, FB, YELP, Z, PCLN, AAPL, TRLA and the countless internet stocks killing it today.
Check your egos at the door when you come to play. This is a sport that requires dedication and focus. Learn from people who do it well and you will save yourself the agony of experiencing trial and error.
If you’re gonna do this, do it right. Read iBankCoin daily.
NOTE: I will be posting the iBankCoin logos that you submitted next week. If you want to create our logo and accomplish immortality, as well as a few hundred bucks, email it to me @ [email protected]. The winner will be decided by popular vote.
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