Price Targets

 

Every day in any financial publication you will find the Wall Street mavens giving their predictions on many stocks. It was issued here and should go there. It is now undervalued and is worth that much more. Really?

Has anyone gone back to check out thesepredictions? I haven't, but I know that as astock increases in price these same geniusescontinue to raise their target prices. How theyarrive at these mysterious numbers is beyond me. When their price target is reached do they evertell you to sell? Not that I can recall. And ifit starts down do you ever hear from them again. Not hardly. They are now predicting some otherstock.

All this is done in loud voices and bigheadlines. There are many reasons given as towhy XYZ will go to $230. And maybe it will, butwhen it gets there (if it does) what do I do? Not one of the Maul Street crowd ever tells youto sell.

Price targets are like doing research. Both are worthless as far as making money in the stock market is concerned.

Here is the secret of how to make money in one of those hot-shot stocks. First don't pay any attention to projected price by any broker. They don't know. All that talk is window dressing to get you to buy. Remember there is someonewilling to sell to you at that price.

And second you should be selling out near the top (not at the top). It is not that difficultto do, but you won't get this from your broker. Since no one knows where the top is then youhave to let the market action tell you when totake your profit. How? With a trailing stop lossorder.

Let's say this hummer took off from $14 and it is now $35. WOW! Should you buy it? If thepublic relations is new and you want to take achance then buy it, but have your exit strategyin place. The media blitz for this stock says itwill go to $90 and sure enough it does, but itkeeps on going. It went right through its targetand is now in outer space above $150 and stillhas rocket fuel to burn. Your trailing stop isnow somewhere about $125 to $135. This beautytops at $255 and plays around there for severalweeks when it starts down and hits your stop atabout $230. Aren't you glad you didn't sell at$90?

The above stock will be nameless here, butI did see this happen and it finally ended down at$2.50. That is why buy and hold should not be inyour lexicon if you are an investor.

Price targets are there for the gullibleinvestors. Learn to use this Wall Street trickto your advantage by using a trailing stop.

Copyright 2005

 



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