Mark Minervini, one of those social media stock gurus, had some good points around technical and what to make about once-market-leaders. Thought you might like to post this up on ST since people are now (FINALLY) starting to heed warnings and think about how much further this could tank.
See below:
To compound money, and not your losses, you need to be aware of an insidious probability I call the 50/80 Rule. Here it is: Once a secular market leader puts in major top, there’s a 50 percent chance that it will decline by 80 percent—and an 80 percent chance it will decline by 50 percent.
Think about these probabilities for a moment. After a stock makes a huge upward move, it will almost assuredly drop by 50 percent when it ultimately tops out. And, it’s a flip of a coin whether that downward move will be as much as 80 percent. The average percentage decline that big market leaders experience once they top is 70%. Timing is not the point I’m making here. This story is a cautionary tale about paying attention to the first loss to hit your radar.
Every major decline starts as a minor pullback. If you have the discipline to heed sound trading rules, you will limit your losses while they’re small and you will not throw good money after bad. But if you rationalize all the reasons why your stop should be ignored or why you shouldn’t use a stop in the first place, then the damage will be far greater when the stock keeps dropping. And if you “average down” through that drop, thinking this stock just has to turn around at some point, then the uncontrolled losses will devastate you psychologically, and eventually decimate your trading account.
Holding a hard falling stock or worse, buying more may make you money once, twice, or a few times. But at some point your stocks will keep on falling. You won’t have just a loss on your original position; you’ll also lose on the additional shares you’ve bought. At this point, you might really compound your mistakes by convincing yourself this has to be the bottom, so you should buy even more! Some investors are so egotistical about accepting mistakes that they double down several times. Amateur traders strive to be right, pros strive to make money.
Buying broken leaders may work for you at some point. But the reality is, you’re compounding mistakes—not money–-and eventually, this behavior will bite you hard and ultimately destroy any chances you have for stellar performance. That’s a guarantee!
A bit sobering, eh?
So, if we take the recent high of $21.74, the 80% probably of it hitting $10.87 has now been completed. Unfortunately, holders deep underwater now have the very real, flip-a-coin-chance, of seeing it declince 80% from those highs to $4.35. YIKES! As cited above, the average decline is 70%, equating to $6.52 - and is much inline with yours and Balance's views (spooky, eh?). Me thinks some posters on ST should start heeding warnings from both of you, yesterday.
Plenty more fish in the sea to be playing with on the stock market than a once-darling growth company with compressing margins, declining revenue and a possible loss of market sector and brand power. Those who claim they are long-term sure better have a better intestinal fortitude than those who require A2M as the coming year or two is going to be very, very difficult indeed...
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Originally Posted by Beagle
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