Oct 18, 2004

Catching the knife

My Dad sent me an email on Friday mentioning buying MRK in here because they have a strong drug pipeline. That may be the case but when a stock takes an instantaneous drop, like MRK did a week and a half ago, it leaves a big supply overhang. Lots of trapped longs that want to sell on a bounce back near flat. Even if this is the bottom, it is better to wait about 3 months (1 mo minimum) to let the stock put in a base and weed out the more nervous holders. My thinking is that even assuming we have seen the bottom the stock will struggle. Take away that assumption and the risk reward becomes wholly unattractive.

Some stocks with better patterns are ALTI and RANGY. Both in materials but ALTI probably will be treated like a tech stock from time to time. Both are penny stocks and subject to big percentage moves but the charts by themselves are nice.

no positions in anything mentioned.


No comments:

Post a Comment