AU Editorial: Signal Your Punches and Get Hit
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September 5, 2008
Well, it should really read "Signal Your Punches And Get King Hit."
I observed one example a few months and saw the King Hit in slo-mo. And witnessed another this week, but I see them happen repeatedly. However, these are two high profile examples I would like to write about.
The first incident took place a few months ago was when a large international CFD provider (who is well known to many of you) sort of pleaded with clients who had money with them not to withdraw cash as they said they were cashed up.
Guess what? There was a run on cash! They just invited a king hit and got it.
Another incident occurred this week: Fortescue Metals this week also pleaded with major shareholders not to lend stock for short selling. Well, that is how it was reported but I''ve suspected for the past few weeks that they have been trying to control the flow of script; I suspect they have been "forbidding" the loan of script.
Guess what? More was lent and the stock just fell further, despite some ‘friendly’ buying. Funny about that. The market smells blood.
Throughout the years I''ve found that the market finds its ‘level’ – regardless. On occasions too numerous to mention I have seen an army of friendlies come in to support a stock. Can you imagine the conversation – "...come on mate, I helped you out and it is time to call up that favour. My stock needs support...." It just does not work!
I have also seen numerous examples of great stories, great companies – but they just do not register on the Instos horizon, so the stock languishes.
It takes armies every day to move a stock – up and down. Don’t stand in the way of that army – move with it.
Whilst I am full of clichés and wisdom, may I proffer another – ‘buy the dream and sell the reality.’ And didn’t we see that this week – a run up of the market with the prospect of an interest rate cut. So we got our ice cream, ate it in a few minuets and we were no longer happy. It was not enough. We had a hissy fit and sold the market within minutes. And as I write, the market is down 2% from its pre-interest rate cut high.
You can get wisdom like this each week in http://www.sharesbulletin.com/, but ahead of the event!
Enjoy the ride
Tom Scollon
Chief Analyst
Trading Tutors Team
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