Page B1 - "The Real Most Active" column.
""A few apparel manufacturers and retailers are making some moves. Quiksilver ran up 1.48 to 32.25. The maker of surf apparel is already extended 13% above it base.""
With the word "extended", it looks as though I.B.D. thinks ZQK is overbought.
OK, now I might a little hostile.
First off, I think its individuals such as yourself who represent this mass psychology which you refer to. I can tell by your reply that you play or invest in different sectors. I have no idea what or how you trade so I won't go there. But it is a point of importance. Here's why:
With regards to your examples, AMGN and GERN. First AMGN. My guess is that this is a biotech or drug company? Yes, I don't know these stocks because I primarily trade retail, footwear and restaurant sectors only. Please excuse my ignorance.
Anyway, do you even know what the normal P/E for this sector is? Do you understand why your investment can't go higher? I don't know but if AMGN is a good company, why worry about it or if you're holding it long term and you know they are a good comapny, who cares unless something structually changes with the company?
As for GERN, you really have to kidding me right? I have no idea what this company is but I just looked at their chart and it went from $1.50 to $5 in 2 days. Are you freaking kidding me??? Wait - don't think I'm impressed or anything. This is a damn penny stock!!! I also looked at a historical chart and it was at $80 back in '00??? So, basically, its dropped 99% from $80 to $1.50 and now that it jumped to $5 (well, its back down to $3.75 already), you're saying its tripled???? If you're gonna go there, I know some stocks that went from $.25 to $3 in a day... how about those? Good grief...
I'm sorry sir but that is exactly the type of mentality of the 'herd' which this market still needs to clean up and wash out which, in the coming months and years, it will...
Extended means moved up. It does not mean overbought.
However, in IBD-theory, it does mean too late to buy. I believe they say never buy more than 5% above the exact buy-point.
This is often the right-hand rim of their cup-with-handle pattern.
I bought this one real dumb. A close above a 3-year consolidation line is a good enough signal for me. Fair value is in the lower $40's, so if more players come to this party, I expect to get there.
I am never sure what they mean by "overbought"....if Monday 5,000 more people decide they want to own Quik does that mean that all of a sudden it is "underowned"....
Any stock that has a run - will by those who watch chartts and not the actual business - think its "overbought". Simply stated if you are investing it does not matter what happens between now and "next Tuesday" That thinking is not investing it is little more than betting the come line in Vegas.
<<I am never sure what they mean by "overbought"....if Monday 5,000 more people decide they want to own Quik does that mean that all of a sudden it is "underowned"....>>
Thought I saw you state in a post earlier that you were a hedge fund manager. I find it surprising that this concept is so foreign to you.
Actually, I prefer betting on the Hard Eight... If you've seen the movie (Gweneth and Samuel), you will know the irony...
Quik - got your email but tried to respond and it was kicked back... will try again later.
Anyway, overbought/oversold and TA in general, its just a 'map' of what is going on with the stock (and the market). If one were to use TA, one also must accept and understand that stocks (and markets) can remain overbought or oversold for extended periods of time, sometimes days, sometimes weeks and even months (though I have never seen it yet).
Many stocks and sectors are over-extended. Take for example, AMZN. What in God's name is that stock doing at $28??? Compare that with say... ZQK and most people would die laughing. This is an abnormal and emotional market right now. One which is very difficult to 'trade' as I will fully admit.
There is no better time to define the markets, in my opinion, with two words - GREED and FEAR...