larry,

didn't you once mention a strategy that says, something like - if a stock gaps down a large percent in one day you should buy it & hold for 3 months (or something like that).

what are those rules again - and do you think CME qualifies?

thanx.

-ja

Joe,

Check out SMR 67 - Panic 101...

http://www.ldholmes.com/password/smr67.htm

CME seems to qualify. I haven't used the strategy much. When I have used it, I've had mixed results. But it evidentally has a good track record.

Larry

Joe,
This is just my gut feeling but I like to wait a week or two before entering and see if the stock will drop a little further (Mrk, Ebay, UPS).

Gary

I agree with Gary... I have been following a system like that for a while and many of the big hits come from multiple down days or are positions that I entered in the middle of the day of the gap... and continued to go lower. (plmo, cree, ebay and even "jobs"-which has done better recently) I didn't buy UPS because I was out of available money to trade it. I think Gary is right that the system may work better if you wait a 2 days-week to buy.

Heath

Larry,
This kind of relates to this thread. I placed a small short position on AMZN a couple of days ago. The stock seems to be trending down in a wide channel. If it reaches the lower level it should bottom somewhere around $30. I'm thinking of adding to the short today. My stop would be any close that fills the gap from today. I will take profits when the stock gets close to the $30 range. I think the stock is extremely overvalued and has shown no signs of being a great growth story that deserves a P/E of around 55 (of course its not going to be at 55 after today ) Does this plan sound logical or is there a better way to play this trade?

Jim

Jim,

I agree with most of what you said. Amazon is in a downtrend (lower lows and lower highs). It is extremely overvalued -- maybe one of the most overvalued stocks on the board. But if I understand you right, you want to short it for a $5 profit with a $7 stop. I would have to think the odds were really in my favor before I would want to do that. I would rather short the first bounce. But you seem to be playing it well so far, so maybe you see something that I don't see.

Larry

Sorry I didn't make myself clear. My stop would be anytime the stock closes in the gap formed by todays open. So basically a close above about $35.15 would stop out the trade.

Jim

Since Joe brought up the Panic 101 strategy, James Altucher (who wrote the book that the strategy comes from) likes NetGear (NTGR) after yesterday's 15% drop on an earnings report that he thinks had a lot of positives. He wants to buy a partial position here and then average down.

I don't think I'll join him on this one, but I thought I would pass it along.

Larry