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RIMM Shows Who Holds The Risk In The Market

June 26, 2008 10:23 PM

I have mentioned before that the people that hold the risk in the market are the “long term holders” of stocks. The brokerage firms that trade do not bear that risk as they do not own large positions, unlike individuals. If I had to take a wild guess, the big firms made money today shorting the stock while Joe Public lost big. I believe it HAD to hold $127.63 today. Once that cleared the rout was on again. I am not sure where this will stop. It most likely will stop the same time the market reverses. So we will have to wait and see.

But do not think this makes the case for “valuation” investors or traders, it doesn’t at all. I do not recall when it was, but a friend of a friend shorted RIMM before earnings a while back because he was convinced that the company was “grossly overvalued”. The stock skyrocketed after earnings and he supposedly lost everything he had. I just see no reason to take that risk, what is the point unless you like to gamble and put it all on black. Let earnings come out, see the reaction and then react, when appropriate.

News changes supply and demand and you have to understand what is going on when there are gaps lower like today on RIMM. If you do not understand the gap reaction and what was below, buying today was more than foolish, it was donating.

Written by Tom@StockBlade.com · Filed Under Stock Comments 

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