Every day in any financial publication you will find the Wall Street mavens giving their predictions on many stocks. It was issued here and should go there. It is now undervalued and is worth that much more. Really?
Has anyone gone back to check out these predictions? I haven't, but I know that as a stock increases in price these same geniuses continue to raise their target prices. How they arrive at these mysterious numbers is beyond me. When their price target is reached do they ever tell you to sell? Not that I can recall. And if it starts down do you ever hear from them again. Not hardly. They are now predicting some other stock.
All this is done in loud voices and big headlines. There are many reasons given as to why XYZ will go to $230. And maybe it will, but when it gets there (if it does) what do I do? Not one of the Maul Street crowd ever tells you to sell.
Price targets are like doing research. Both are worthless as far as making money in the stock market is concerned.
Here is the secret of how to make money in one of those hot-shot stocks. First don't pay any attention to projected price by any broker. They don't know. All that talk is window dressing to get you to buy. Remember there is someone willing to sell to you at that price.
And second you should be selling out near the top (not at the top). It is not that difficult to do, but you won't get this from your broker. Since no one knows where the top is then you have to let the market action tell you when to take your profit. How? With a trailing stop loss order.
Let's say this hummer took off from $14 and it is now $35. WOW! Should you buy it? If the public relations is new and you want to take a chance then buy it, but have your exit strategy in place. The media blitz for this stock says it will go to $90 and sure enough it does, but it keeps on going. It went right through its target and is now in outer space above $150 and still has rocket fuel to burn. Your trailing stop is now somewhere about $125 to $135. This beauty tops at $255 and plays around there for several weeks when it starts down and hits your stop at about $230. Aren't you glad you didn't sell at $90?
The above stock will be nameless here, but I did see this happen and it finally ended down at $2.50. That is why buy and hold should not be in your lexicon if you are an investor.
Price targets are there for the gullible investors. Learn to use this Wall Street trick to your advantage by using a trailing stop.
Copyright 2005
Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
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