We all know that Amazon will be our “go-to” online shopping mall for years to come.
If you pass by an Apple store, you can clearly see the incredible crowds they draw…no matter what time of year, holiday sale, or new promotion.
These companies are clearly the future. That said, as I am writing this article, the stocks are not moving with the theories we know to be true.
Disney is down big since the release of Star Wars, which has now become the number one selling movie of all time. Amazon is down 30 points today.
And, Apple is now below 100–a price considered inconceivable when it climbed to over 130 in 2015.
You see, here’s a must know fact: stock prices do not move based on the value of their company. Prices move on the perceived value.
It’s a big difference.
By incorporating the word perceived, you allow in other intangible factors such as emotion.
People get emotional, traders get emotional and hedge fund managers get emotional. That emotion leads to market extremes and that’s when the bigger problems set it.
You see, everything is easy when stocks are going up. When stocks are going down is when it gets tough. When you are losing money, it’s no longer just deciding on Disney’s value; you now must compare Disney to Apple and Amazon, and decide which one you are going to keep.
I had a great conversation the other day about Amazon. I said there’ no arguing that Amazon will be worth a lot more ten years from now; but at the same time, the stock is trading over 600 and it can easily fall hundreds of points before going higher.
I can’t stomach that kind of drop, can you? In just two days, Amazon went from 625 to 581. Their business model did not change! The only thing that changed is ‘their perceived value in the current market conditions. That’s why when I trade, I trade off of technicals and momentum.
The greatest trading book I ever read highlights the best momentum trader I have ever seen.
In this book you can see how he does not care about the company, only the price and the momentum of the stock.
When you move from investing to trading, you gain something extremely valuable… and that is control. The market has dropped well over a thousand points this year and I am as happy as can be about it.
My trading group and I are just watching the fall as we wait to take advantage of discount prices down the road.
You see we are not ‘married’ to Netflix (NFLX) so when it dropped from 116 to 106 today, it just presented an opportunity.
Now we can look to grab it at 100 for a 10% move back up. That’s control.
The first thing that I give to everyone who joins my trading firm is this book. It highlights the highs and lows of trading and the best place for you to focus.
So the next time somebody highlights the ‘it’ stock at a party, don’t just buy it. Start finding the best price where you can trade it.
All the Best,
Adam Mesh is CEO and Founder of The Adam Mesh Trading Group. For the past 18 years he has coached thousands of students to all levels of success in trading. He is also creator of the revolutionary Advanced Beginner’s Guide