I still think the small investor can do better than conventional wisdom says. That's a pretty abstract statement by itself, though. Oh, I'm so tired of trying to explain this. It's sort of like I'm saying what you believe in determines your results. Not determines, maybe. Maybe I take that back. It's a factor, let me put it that way. The logic of the idea is, if you believe you can only achieve a little, for instance, your actions might reflect that. You might only pursue small achievements, and that might result in only small achievements, where, if you believe you can achieve big things, you will pursue big things, and that might result in you achieving big things. That's the logic of what I'm saying. Might be true, might not be. Might be faulty logic, or, there might be something to it. Now what?
I suspect there's something to it, but it needs to be properly understood. What is this thing, believing? It's not the same thing as knowing. In fact, it's sort of the opposite. People will say "it would be foolish for me to pursue greater accomplishments ..." - it looks like I'm saying you aren't pursuing great things, even like I'm saying you aren't pursuing great enough things. What the heck is going on here? What is this about? It is, I would say, not about you, it's about me. I feel like people are discouraging me from pursuing my wonderful dreams because, well, they don't think I'm smart enough, they don't think I'm up to it, and they think I'll get in trouble, or never get anywhere, because of overreaching. I've got to think there's wisdom in what they're saying, but I can't wholly accept it.
What people are saying, these cautious, sensible types, is, you can't dream and be sensible at the same time, so quit dreaming. That, I can't accept. So maybe that's what believing is: dreaming. And then it's the idea that you can pursue a dream. It's not, probably, an easy thing to do, but maybe it's something you can do, maybe it's worth doing ... and then the question is, how do you do it?
One of my dreams is making real money in the stock market. It's just something I latched on to, years and years ago, and I'm not letting go of it. I like it. It's not that getting rich is that big a deal, or will likely solve all my problems, or all your problems. It could be a bad thing to pursue, this thing, wealth. That's like power. Your car is powerful, and that can get you into trouble. You still have a car. You still drive your car. Again, I say, just dreaming alone, definitely, that's a recipe for trouble. If you want a relatively trouble free life, you need to be practical, and sensible, and pay attention to practical and sensible things. That doesn't mean you shouldn't dream, and pursue dreams. I'm trying to provide a service, is what I'm doing. That's one of my dreams. I'm trying to encourage people to dream. The idea of making money in stocks is the essence of dreaming. It's a symbol of dreaming. It's an abstraction, but there's a certain logic to the idea that the reason I'm encouraging readers to think about pursuing wealth in the stock market is to encourage readers to dream. I'm not saying you should dream, or dream this way, I'm just trying to encourage you, if you are looking for encouragement.
I believe anyone, and certainly you, can get rich in the stock market. There's actually evidence to that effect. The opportunity seems to exist, and I think it's a question of putting the pieces of the puzzle together, so that you can seize that opportunity, if you want, and not a question of whether the puzzle can be put together. I suspect it can be put together.
Same goes for other dreams. How do you put puzzles together? That might be a good way to think about it.
Here's actual evidence that the possibility of making really good money in stocks does exist. I used the internet to search for stocks that are up dramatically in the last month or so. I will tell you that, on any given day, hundreds of stocks have doubled, since the day before, and many of them have much more than doubled, in one day ... but those are not actual opportunities. They are just what everyone says they are, a kind of mirage. Specifically, they are very thinly traded stocks, backed by companies that are likely to fail, or already have failed. The stocks may fluctuate wildly, but you can't buy them, and if you do buy them, you will loose your money. Maybe. I don't actually know that, but the arena of, what, ephemeral stocks, looks risky and impractical.
No, these are big company stocks, or vigorously trading stocks. You can easily buy or sell thousands, tens of thousands of dollars worth of their shares, any time. So, among that type of stock, how many are dramatically up on any given day? To get the evidence, I'm using a tool - the moving average scan at Finviz.com - to look for stocks that are dramatically up. Finviz only covers actively traded stocks, so the scan is by default actively traded stocks that are up dramatically. Today, there are nine of them. Nine! It's not a huge number, but it's not nothing.
APP is a stock I've been watching for a while, and now, in the last month, it's dramatically up. That's at least a smidge of evidence I'm looking at the right kind of stock. (I actually bought some, but that was a while ago, and I payed too much. I haven't actually put the puzzle together yet.) And, if you have read the earlier posts - the ones linked in the Use Only Limit Orders post - you will recognize in the APP chart the kind of pattern I wrote about. I should add that those posts are flawed. I'm thinking about redoing them. But they do describe these patterns I'm talking about, and if you read them carefully I think you can get at least an idea of how I'm saying they can be used, to buy low and limit risk. You can see the breakout above a block type pattern, in April, and then just a fleeting return to the block pattern highs in June, and then, indeed, a dramatic rally.
Once you're in a trade, you are going to think about when to sell. Holding forever might be the right thing to do, but it's not what this blog is about. Maybe it should be, but it's not. If we had bought APP at .5, should we be thinking about selling it? Well, there's a kind of shelf in the down trend on this chart, and prices are now at that level. I think what's going to happen is a pretty sharp dip back to .5. If you sell here, and then that happens, you'll be happy. But that's not guaranteed. I've been thinking about how to take profits like this, but also, stay in the stock if the "dip" doesn't materialize. There is, after all, a big top at 2.40, and a pretty good likelihood that's where APP is going, either right away, or after a dip. All right, what I was thinking about doesn't pan out, when I look at the evidence. Pretend you bought APP at .5, there. Now it's above a dollar, and the question is, should you sell it? There actually isn't a completely convincing sell signal in the daily chart, and the possibility exists it will just blast through this intermediate level, and go to 2.40. I think the greater likelihood is it will turn at 1.50. One option is to watch it very closely when it reaches 1.50, and try to decide then whether to sell it. Another possibility is, after it reaches 1.50, a real sell signal will develop. I won't write about that here. I'll write about it if it happens. But, if it does happen, it'll probably be too late to sell at 1.50, but there's a good chance it'll still be possible to sell at a dollar, or a little more. If a real sell signal does appear, then a return to 50 cents is probably going to happen.
By the way, the one thing I'm not doing is selling when my stocks are down. If we don't manage to sell at $1, and APP does go back to 50 cents, I mean, you've got your stop below the block pattern bottom, but don't sell it unless you get stopped out. Does that make sense? This is a big, big company. It's maybe kind of a strong company. It'll come back.
Looking at the long term chart, it's probably going to 2 after a dip - or, maybe, without a dip - and then it's going to probably pause, and come back down some, though maybe not all the way. It'll make more buying patterns, though, and you can get back in. Then it's going to 4, where it'll pause, and then 7, where it'll pause, and then 10, where it'll pause, and then 16, and 3/4s. That's what the chart is telling me.
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