Nova Crash and More
Ouch, I was just checking out my watchlists and noticed Nova down more than 22%. That's a real hair cut in one day especially considering the trend has been down since April.
To tell you the truth, I did not expect things to go down this low but I did tell you that the trend was down and that things didn't look good. And not just for Nova, I have been bearish for a couple weeks now.
Truthfully, Nova did experience a parabolic rise which may have given you large paper gains. But a paper gain is nothing until you cash it in. Looking at this chart, it looks like Nova has peaked for now and the only direction it's going is down.
What? Forever? I don't know! If the trend reverses, I would be glad to go long because Nova's tight share structure lets it fly like not many other stocks can. Would I be surprised to see this stock go down to $0.50 and then back up to $5.00? No. Will it happen, I don't know but I will keep this on my watch list to track its progress.
Once or twice a week, I like to browse the Stockhouse Bullboards. For investment ideas? No, for entertainment.
The Bullboards are great battlegrounds for fear and greed. When a stock is going down, all the "regulars" are bragging how great they are and how great their stock is. They set crazy price targets and fall in love with their stock.
When the unavoidable drops and/or downturn comes, then so called "bashers" appear saying how terrible the stock is and how it's going to 0. The "regulars" quickly bash the "bashers" and tell them to get away because they don't know what they are saying.
Unfortunately, when real correction like the one we are having comes along, they really hurt the "regulars" wallets but they often decide to stay the course anyway because their stock has such great potential and such great management. Sometimes the stock does recover but often the "regulars" sell out at a huge loss (if they sell at all). Even more dangerously, the "regulars" say they will sell at a smaller loss when the stock rebounds. If it does rebound, they don't sell because they believe it will become great again. And if it doesn't rebound, they don't sell either because it hasn't rebounded yet! You may smile now but I guarantee you have don't this before. I have too but I have learned from my mistakes.
So what is the moral of this little parable? Well for one, browse the bullboards for entertainment if you want to but never for tips. Second, don't fall in love with your stocks. The stock doesn't matter really, what is most important is that you sell it for more than you paid for it. Your emotions shouldn't affect your buy or sell decisions. By reading the bullboards too much you begin to believe things that aren't true or greatly exaggerated.
I think that as long as you are following the trend of a stock, you will do better than reading the emotional responses of small investors. Before, I finish this little post, I want to give you a profile of a possible poster on the bullboards whose responses you may have read and based your investment decisions on:
I went to the library a couple days ago to borrow the book "Twilight in the Desert" by Matthew Simmons. As I reached the second floor and was approaching the shelf I wanted to get to, I noticed that ROBTV was on the TV. That's weird, why would the stock channel be on in the Library? I shrugged and found my book on the shelf. As I was walking back, I noticed there was some guy, unshaven and wearing worn out, dirty sweat pants sitting at the computer focusing at his computer screen and typing aggressively. I immediately recognized the stockhouse website and he was of course typing some response on one of the bullboards. I smiled to myself and kept walking.
Just keep this story in your head the next time you are really believing what someone wrote on a message forum (or anywhere else on the net).