Just some observations on AOL stock. If I was the small investor and I were long I would definately take my profits now. I've bought and sold this stock several times with huge profits. I sold my long position today at 110(I got in on 1000shares at 84 only about 1 month ago). I did'nt buy AOL because I like their service etc...in fact I don't and I think the fair market value of this whale is 40bucks tops. The reason I bought in on this ride is because of all the institutional hype! 70% of AOL stock is institutionally owned. It is these guys and the momentum traders who really control AOLs price. When the price of AOL didnt tank on the advertiser class action lawsuit announcement last week, it was quite obvious that the institutions were not going to let this whale deflate (otherwise I would have bailed in the high 90's. Thus it became apparent that AOL sock would still have one more leg up. However in my wildest dreams I never would have imagined a sudden move above 110. I thought I would be lucky if it would hit 105 before earnings. I definately did not plan to hold my position beyond Tuesdsay as I firmly believe that earnings will disappoint (no way will they make 16 cents diluted per share for Q4). AOL claims they spent over 700 million in Q4 alone on networking inprovements and I don't think their advertisor income will grow at the rate the Anal ists predict. Anyway if you are long I would advise that you sell before earnings tomorrow. I believe that the rise today was influenced by 3 factors. 1)After the bad news (yes I believe a price increase in a business that is becoming extremely competitive is bad news) came out the share price started to increase on heavy volume with large block trades which I attribute to the institutions doing exactly the opposite of what your average small time fundamentally educated investor would have done. 2)Then the shorts started to panic but mostly those wealthy momentum investors jumped in thus moving the price up further. 3)At about 105 the shorts really started to panic and massive short covering (along with more institutional buying and probably many uneducated small investors jumping in after hearing the target price of 150 by some unkown security house (they probably bought in at 50 so 150 sure sounds good to me).
Anyway, although I dont believe in shorting stocks(I've lost too much and have learned the hard way) I would definately be scared to hold AOL stock long especially if I bought in at anything over 95. When the bad news comes out tommarrow look out below on Wendsday morning because it only takes one large institution to decide that the party is over and lock in profit time has come. By the way look at the charts on price action last fall. When Fidelity decided to sell off a significant portion of their holdings (because they felt it was overvaluated), the stock price droped from the low 90's to a trading price of 64 ie an over 30 percent haircut. Sorry for all my babbling and good luck traders both long and short. PS I'm looking to buy in again after the selloff but only if it is greater than 30 percent of todays trading high of 112.