Why I don’t care if a stock is ‘undervalued’

Of course the biggest reason for not taking too many long trades, is that very
few stocks are completing sound basing formations and attempting to break out.
Patience is key — both long and short. If a trade meets your criteria, take it.
If it doesn’t, just wait. If there aren’t many trades meeting your criteria,
then the market is telling you that the market environment is not favorable to
your strategy. That’s important information. Listen.

After remarking that I saw very few trading opportunities on Monday, I was sent
a number of emails explaining to me the tremendous opportunities in some tech
stocks. I was told about how valuations in companies like
(
EBAY |
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PowerRating),
(
YHOO |
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PowerRating),
and
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AMD |
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PowerRating) were becoming attractive. Here’s my thought on buying stocks (or
ETFs) with charts like these…

I do use some reversal strategies that would allow me to take advantage of
short-term oversold conditions on occasion. I do not try and hold on to
positions with these types of charts for long-term gains. I don’t care if they
are “undervalued”. If I’m the first one to realize this, then who knows how long
it will be until the market agrees with me? Value buying can be a profitable
strategy for large funds with long-term horizons and large research departments.
It’s a dangerous game for traders — especially in a bear market environment. For
all their effort, most bottom-pickers end up with little more than a finger full
of … Along with losing money, that’s something I try to avoid.

Best of luck with your trading,

Rob Hanna