I am not sure who it was that I traded emails with on this, but one of my readers asked me if I was going to buy Facebook when it went public for quick money. My response was I would short it before I would buy it. Of course now that we see what has happened it is easy to brag. However, the reason I said that is that I know that IPO's are basically a 50/50 bet as to whether they rise or fall, so they are not trades I will ever do. Also, the stock market is in a down trend, which is also another reason not to be long anything. We know that for the most part, almost all stocks are following the overall market very closely now, so there is no reason to get overly bullish about any stock right now. Further, this company's financials do not support anywhere near the valuation this stock has even where it is now. This was a sucker bet from the get go.
This case is no different than anything else, do your research before putting money at risk. For those who are smitten by this company, you could look for some type of divergence in an oscillator now to buy it. That is not a play for me, I am sick of Facebook, and if it just went away I might throw a party. I have people come to my ranch, and they spend the whole time uploading photos right to their facebook pages, it is really annoying. I just want to say what Howard Stern's father said on America's got talent last night to this one dude who got booed off the stage. "I told you not to be stupid you moron." Even though it won't happen, I hope GM and Facebook both go to zero. Remember GM that wonderful turn around story that still owes the government 50 large?
With IPO's the best strategy is to get yourself in position with a broker to get some of the shares before they go public and sell them on the opening day. Unfortunately that is an insiders game and small investors can't ever get into that position typically.
I have not been showing as many of my trades lately as I used to, so here is another one in addition to the Cocoa trade I showed yesterday, Soybeans. I have not mentioned this one in advance for no particular reason. You can see where I got short, the Genesis program shows where the entries and stops are resting on the screen. Although there is more to the trade than this, in essence this was just a break down, then sell the bounce when I thought the up momentum of the bounce had exhausted itself. I use specific rules for these types of things, but I am not going to get into all of them today. You can see where my target for this trade is resting. Will we get there? Who knows, and perhaps I will be stopped out or take profits in some other fashion before we reach that. At the moment the plan is to hold for that target.
The Bond system trade is starting to look like it might wind up working out after all, but I still stand by my view that it is a trade I would have filtered for the reasons I stated yesterday. You had to ride this down close to where the stop was, so it has been a lousy trade up to this point. One thing to keep in mind with systems is all trades are the same. You really should not view this as a lousy trade or a good trade, it is just another trade that it spit out. My editorial comments really should be ignored. Just because I am the creator, does not mean I should get emotional over my son. The entry was 148'02 so any open greater than that is an exit.
One thing to keep in mind here is that trading a run like this is difficult, so the fact that the system has not done very well here is not really a problem. I don't know of any approach other than a moving average crossover, that would have caught a big part of this.
The equity markets are in a tough spot here, my short term things are just not quite at the sell again mode, but they are close. I have seen some big picture Elliot Wave counts that seem to be of the type that are pretty clear as opposed to those that have two possibilities. If they are correct and I have no idea if they are, the stock market over the next couple of years is going to absolutely crumble. If you have any interest in that surf the web, I am sure you can find them.