Even though I closed my SAH position, I have been following SAH price action.
Yesterday, SAH announced that they will be restructuring their debt and that caused another spike in the price. As of this writing, SAH is at 6.5 and heading higher. Obviously, some folks were in the know about this restructuring and they started accumulating SAH after it hit 52 week low. Anyway, it just goes to prove that there is no point in rationalizing about what should be the price for a particular stock. You don’t have all the information to make that call. I am glad that I closed out my position SAH [wish I had done it sooner]. SAH has taught me a lesson which I will never forget.
On similar lines, almost all the financial blogs I read talks about how this is a bear market rally and it’s going to pullback soon. So many folks have tried to short this market thinking that rally will end but it refuses to die. I have read quite a few comments where people have lost thousands by buying short ETFs in anticipation of the pullback. I can completely relate to their pain. Even though I am watching market go higher from sidelines, my hunch is to go short and not long.
I think I understand what’s happening here. The problem is that our brains are logical (too logical?). The economy fundamentals are horrendous and our brain tells us, ‘SHORT SHORT SHORT’. It is telling us that market is acting ‘illogical’ and it’s bound to get ‘logical’ soon. The only problem is that will you be able to survive while market takes time to make a u-turn and start behaving logically? When Scott, Fear and Gree Day Trader fame, wrote that he doesn’t care about company’s fundamentals, economy, news etc., I couldn’t believe him. Now I know what he was doing. He was studying the only action which matters, price/volume. I don’t think I am there yet, but I think I know what to do when I return back to my trading.
Trade well,
RJ
3 responses so far ↓
1 xyz // May 6, 2009 at 3:54 pm
shorting once the new rules are enforced will not be so easy to do, and so stock will go down, but they wont get beaten down like they did few months ago. anyone was able to short few months ago blindly, that won’t happen much now. right now its way to easy to go long, that will change too, but anyone who’s expecting stocks to crash again will be sadly mistaken.
2 ryan // May 7, 2009 at 11:34 pm
The uptick rule didn’t get eliminated until 2007 according to wikipedia. That means that from 1938 until then all recessions (including the huge drop in 00/02) and the infamous drop of 1987 took place during the uptick rule.
I’m not saying that the drops would’ve been further or whatever if it weren’t in place. But I don’t think it will eliminate substantial downside action. In same cases making it more difficult to short has actually limited market liquidity and pushed prices further down (that tends to be the case with outright elimination of short selling).
Anyway….
hope you read some F&G Trader RJ; he’s very good at what he does.
3 xyz // May 13, 2009 at 4:25 pm
long run now seems over. lets see how much the market and stocks go down in next week or so.
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