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Time Warner Inc. Message Board

  • neophyte2000 neophyte2000 Feb 9, 1998 7:05 PM Flag

    AOL price action

    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).

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    • very good analysis! I think this board needs more analysis like what you just made instead of simply price prediction without much base. Thanks for putting your thoughts here!

    • 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.

 
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