Posts filed under “Apprenticed Investor”
Interesting IBD lecture on why Buy & Hold can be so costly, and how to use charts to avoid disaster stocks:
-You buy a
stock. Soon, the market suddenly starts to decline on heavy volume.
-Watch what the stock does.
-A pull back to its 50-day moving average in quiet trade, is an okay sign to stay long that name.
-On the other hand, when a stock that "slashes through the support line on heavy turnover," that’s a red flag.
IBD adds: "Did
the stock trigger any other sell signals such as a downward reversal,
the largest decline since its breakout or a 7% drop below your buy
point? If so, it’s a good time to unwind your position."
click for larger chart
then started its long decline. It went into a free-fall in November
2000, suffering a 63% loss (point 2). Volume was 65% above average
This alone should have been a sell signal for
investors. And the fact that the market entered a bear period should
have alerted them that this decline could continue for a while.
the time March 2003 hit, the stock lost all its gains and more (point
4). After some attempts to rebound, it is now still trading around 2.
Buy-And-Hold Strategy Will Often Backfire
Investor’s Business Daily, Friday March 24, 7:00 pm ET
In the past, I have warned against relying on the magazine cover indicator for specific companies. There are some very specific caveats on this here. The reason for this is that, in my experience, the Cover Indicator is useful for determining when large social phenomena are reaching an emotional crescendo. Oftentimes, emotions take over at…Read More