what if someone came out with a new formation of a chart pattern and said this is the absolute best time to buy a stock. would it actualy become the absolute best time to buy the stock just because now everyone is looking for it and buying into it?
In short, can we create a self-fulfilling prophecy? I think the risk is more so now than formerly. Back in the pre-internet age information about stocks was gleaned from either a financial newspaper subscription, a visit to one's library to read Value Line, or so on. Now with the advent of internet chat rooms, all sorts of on-line screening tools and such, the dissemination of information is much faster and people with on-line brokerages can respond faster.
I recall reading someplace how the SEC busted some kid years ago now, I think in the tech bubble of the late '90's where he talked down a stock in a day-trading chat-room, placed a short order and made out like a bandit. The company quickly issued a news release countering the kid's pronouncements, but the damage had been done. They let him keep, BTW, the other $300,000 or so in profit he'd made as they had no direct proof of such actions. If they'd only given Bernie Madoff such attention!
But, to keep Praveen happy and bring this post and discussion reasonably back to being on topic, the question to ask in the context of his system is "is there a best time to buy a stock? In the ideal sense, of course, buying in late 2008 would have been ideal, as you'd have been spinning off profits for a couple of years now, more than likely. In late 2008, however, the majority opinion was to SELL.
The reality is that any time is the right time, though it must be cautioned that such a generalization does not relieve one of the necessary due diligence. When even institutional bellwethers such as General Motors, which back in their prime ranked up there with God, Mom and apple pie can go belly-up, no stock should ever be considered sacred and immune from whatever the market or world conditions can throw at it.
Some of us have made the sacrifice of the potential for more extreme volatility, and thus any reward based upon volatility capture systems, for the generally lesser risk of either closed end funds or exchange-traded funds. Surprisingly there is still enough volatility to make these work, especially if checked on a fairly infrequent basis. As Praveen noted elsewhere in a prior post, one is best served by sector or narrow-focus funds, rather than the broad-based full market tracking funds.
Best,
AIMster
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