If you have time and want to see the other side, go to Investors Hub website and read Zhone thread from July 23 onward. This gentleman "swing_trader" apparently took a short position on July 23 thinking it will pull back. It is interesting to read some of his comments and responses by other posters since then.
Sentiment: Strong Buy
Interesting. In summary: he took a short position on July 23 at $2.32 and he's surprised at the massive loss he's taking now. He claims it took a big bite out of his profits shorting futures. He appears to be cocky in his replies and states the markets these days belong to day traders.
A couple of points: either he hasn't learned anything from the 1999-2002 day-trading days, or he's not old enough to have participated back then. Either way, he should be ignored.
I've come to believe that people following strictly technical analysis (like him) are not smart enough to do fundamental analysis (John Bollinger excluded).
As most of you probably know, NASDAQ provides a twice monthly snapshot on short interest.
The latest 7/15/2013 figure is 33,245 I think and it has varied between 20 and 50K shares for
quite some time. What would have been interesting is to see what it was on a day by day basis
during ZHNE's recent rise. A long time complaint is naked shorting allowed by some brokers
I believe. It is very helpful but dangerous in low float situations like ZHNE's. I wonder how many
others beside this guy got burned.
In one of your posts you were wondering about the source of the liquidity that has led to this large volume - 26.5M in the last 7 days. It is possible that a big chunk of this volume came from unsuspecting traders who saw this huge upward move, considered it typical overextension and shorted, and are since then stuck in their short position. It will be interesting to see how big this short position is, and how this short position alone will impact the stock price in coming days.
Sentiment: Strong Buy
A trader looking at a chart probably hasn't done much fundamental research. TA is supposedly quantitative psychology. Zhone had a deep malaise that kept the price down for a long time. To just look at a short term chart and think you understand a stock is dangerous. Shorting into a "previously hated stock" after a tsunami sized move, when you don't understand the fundamentals of the business is what caused to swing_trader not to
anticipate the stocks strength coming up.
Those of us deep into this stock over the last few years probably have a much better understanding of the Zhones upside potential. I tried to use the Nicholas Taleb barbell strategy, put most of your assets in safe stuff, like paying of the mortgage, real estate etc. The put a fraction of your wealth at risk for things with a big upside potential I had clearly put zhone into the camp of a "black swan stock", it would lose most days, but one day it would hit big. Which has proven to be the case.
A true "black swan stock" is one you hold mostly and don't trade in out, because the upside event(s) are infrequet. So infrequent, that if you trade out entirely you can miss them, making the risk of trading zhone
higher than just holding.
Maybe 10 or 20% of stock owners are value investors, the rest of the world is "trend followers". But the great unwashed masses enter into this positive feedback, where they are all buying because everyone else is buying.
Eventually this run will end, but I told myself after earnings, let it run. take a few bad days to confirm the run is over.
The question is will this run go till some "realistic valuation is achieved? ( 6 to 8 $)
Will this run overshoot?
Is the run already over?
I am retired and still somewhat of a gambler at 88 years. I have been in and out of ZHNE
and its FIBR predecessor beginning with a small purchase in 1989. In March 2000 I was
holding a 23 bagger mostly by adding on dips and holding. A lot of that quickly disappeared
when the bubble broke. I now have around 28k shares with a price of around $6 but I am
whole as of this day due to buying at penny prices. I could have bought much more but
that was not prudent I felt. In 2010 I tired of negative bank interest so I went back to Calif.
and paid cash for a foreclosed 4 bed, 2 bath home that a real estate person had bought
and fixed up a bit for flipping. Zillow now says the house is worth 30% more than I paid
for it. So that is my diversification. For TA, I like Point & Figure but I diddle with the parameters
to get short and long time views. DD also requires a study of cash flow and balance sheets
besides looking into product and customers. I don't trust analysts or anyone on TV. I do
read the WSJ and listen to friends who demonstrate knowledge. I think there are only
about 4-5 here at the present time - you included :) I also certainly include alakamuna
who has been most generous with his time.
I do not fully understand and therefore do not seriously follow technical analysis for equities. But I do look at it from time to time out of curiosity. On P&F chart for example, Zhone has started a new upward trend. The last one happened in 2006 and was short-lived. This chart shows a price target of $8.5 which I like because it matches the projections suggested by fundamental analysis. But it is interesting that the same chart a week ago was showing a price target of zero, even though the fundamentals were consistently improving for previous nine months.
Sentiment: Strong Buy
Good post. Keep in mind a few pts...
1). Hindsight is 20/20. You don't know where it is going, but you know where it's been
2). Buy and hold the black swan. Don't settle for pennies as you don't know the true potential on where the black swan will go. If your Black Swan is the next apple, chances are you won't experience the true upside
3). Don't sell out completely your entire position. Always hold a few hundred share of the original block to ride to the wave
4). Dollar cost avg - decease your share price. Newbies email me...
5). Don't fight the tape and trend is your friend - important!
Take these tips to bank