Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Wednesday, November 30, 2005

Member question on CMED

Today is a question that I received during the day Last Wednesday (one week ago today – 11/23/05).

E-mail Question:

Dear Chris,
Yesterday was a mixed feeling day for me in the market. I tell you the story as I needed someone to cry on!!!

I took a position after a month break as I was moving apartments. I bought shares in CMED an IPO that looked good and was on a strong upward trend. I bought at $37.40 on Monday and it closed slightly off that at day end. Tuesday it starts a big rise and hit $42.6 at which stage I was up 14%!!! In Gib we are 6 hours in front of you so when I checked my position at 7pm here 1pm there I was doing well, I think the price was at $40 approx and the up trend continuing. So I went home with a high - I have not got a computer at home yet. Come into the office this morning open my screen and check the position and it has slumped to $34.18!!! and with a further slump after hour close to $33.43!!!! I am now in a 10% loss position.

What could have happened? Was the news that a new Chinese IPO had postponed its entry as reported on Reuters that negative?

Well I am licking my wounds now and quite depressed, back to the drawing board I suppose. Greed again got the better of me and I should have closed my position before going home.

Take care and talk to you soon.

Regards,
(Actual name will be anonymous to protect the privacy of our members)


My Answer:
Dear Anonymous,

On Monday night, I gave this analysis for CMED:

“11/21/05:

Medical:
CMED – 36.92, three consecutive days of big gains with two gap-ups (possibly a climax run) that may result in a harsh, quick correction.”

Well, that quick harsh correction came at the end of the day yesterday.

You should never try and chase an extended stock. I will still place a stock on my daily screens if it is hitting new highs but I never put CMED on the weekly screens because it was too extended for a buy (in my opinion). The gap-ups and quick gains resembled a climax run which usually results in a harsh correction, similar to what we are now seeing.

At this time when I am not sure what is going on and the position is moving against me, I sell and sell it all immediately! After I sell, I sit back and take another look without any emotion involved and reassess the situation. It is ok, just sell for a small loss and move on.

Good Luck,
Chris

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