Kind To Be Cruel
Back in March 2000, a friend of mine invested his
entire 401K portfolio into biotechnology stocks. His account is down to maybe an
1/8 of its original value. He tells me that he’s hoping that advances in genomic
technology will extend his life the extra 180 years it’ll take for his account
to come back enough so that he can retire.
I told him that the market had done him an act of
kindness by burning in his head that you can’t buy and hold something on the
basis of other peoples’ opinions. Following a system, analyst, or guru blindly
— you let you guard down. You’re no longer thinking. You’re no longer
processing every bit of information that comes in like a real trader does.
Next time, my friend will know better and use a
stop.
Now…I was thinking of giving my friend a better
idea of how long he’ll have to wait before his biotech-weighted portfolio comes
back. This chart gives a vague sense where biotechs are.
While the Biotechnology Index
(
BTK |
Quote |
Chart |
News |
PowerRating) is
plunging — it is soon going to meet up with long-term support off a
two-and-a-half-year trendline, its 2000 lows, and its 61.8% retracement (1998
lows – Sept. 2000 highs). If past is prologue, a bounce will occur. From there,
my friend will want to look for the BTK to stay above this support level so that
its long-term uptrend can stay intact.
Speaking of history repeating itself…
….I see twins in this chart of the SOX. Bearing
in mind what Jeff Cooper told me over the weekend — that history repeats itself,
but never in the same way — we can look be watching for something resembling
the price action of December to take
place, but maybe with a twist.
See you Thursday,