OVERBOUGHT/OVERSOLD
THE ALCHEMIST by AL THOMAS
OVERBOUGHT/OVERSOLD Has your broker ever told you that a stock is"overbought" or "oversold"? He probably went onto explain that the stock you own (I hope youdidn't) had gone down so far that it now wasoversold and due for a rally. He might also haveencouraged you to buy an equal amount to "dollarcost average" your position so that when ("if"- hedidn't say that, I did)) it did go back up youcould "get out even". He might even say you "couldmake a fortune". Waiting to get out even is the great trap that is preached by all the big Maul Street brokeragehouses. What is even worse is most brokers andfinancial planners believe it.
What happened toall those beautiful company reports sent to youtelling how wonderful this stock was before youbought it. Maybe you better read those back tohim. Brokerage companies do not want you to sell. When any stock is going either up or down for any extended period of time it does seem logical that it can become overbought or oversold, but let's examine what that means to your ownership. The reason a stock started up is because theunderlying profit projection is going to producesubstantial profits that will make the stock morevaluable.
At some point it is going to reach atrue valuation and should stop advancing. Whatusually happens is it goes beyond true valuationto what could be called overbought (over valued)and then starts down. You may be encouraged to buywhen a particular stock becomes "hot" and everyoneis buying it. When all the sheep are buying youwant to be a seller or you will also be sheared. Suppose all this was in anticipation of futureprofits that did not materialize? Then the risewould turn over and head down.
This would be morelikely for a smaller company than one of thegiants, but giants have been toppled. If any fraudwas involved the company might even go bankrupt. Think back to WorldCom that went to the moon andwas finally flushed down the sewer. Did it EVERwhile it was tanking become oversold for a rally?Not hardly because there was no value. Unless youtruly understand how to trade overbought andoversold situations the best thing to do is keepyour hands in your pockets.
Beauty is in the eye of the beholder. Overboughtand oversold is in the mind of the buyer/seller..
Copyright 2004 Albert W. Thomas All rights reserved. Former 17-year exchange member, floor trader and brokerage company owner. F*R*E*E investmentletter www.mutualfundmagic.comAuthor of best seller "IF IT DOESN'T GO UP, DON'T BUY IT!"Tiesto to do the Double at Avalon Hollywood
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Tiesto to do the Double at Avalon Hollywood
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(ContentDesk) August 16, 2005 -- Credit & Management Systems, Inc. (CMS), a leading provider of credit and collection software and ASP solutions for business-to-business relationships, and S. J. Rundt & Associates, Inc. (Rundt's), a leading provider of country risk analysis, have entered into a strategic alliance for the purpose of integrating Rundt's Country Rating directly into CMS's system offerings, principally the Corporate Credit Manager system.
This alliance enhances CMS's credit scoring capabilities by automatically incorporating country risk for short-term trade credit into CMS' scoring models, enabling CMS clients' to better manage their worldwide accounts."Managing international trade and credit profitably today requires more alertness and more timely and reliable information than ever before.
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Projection tv > Credit & Management Systems Teams with Rundt?s for Mitigating Country Risk