Net stocks aren’t flying very high anymore, but they’
re still setting up nice swing trades. After
getting pummeled for months, many of these stocks are bouncing off multiyear lows. Driven by
optimism that things can’t get any worse, market players have finally reawakened the Net rally.
But pick your trades
wisely. With few exceptions, Net stocks face an extraordinary burden of
overhead supply. Vast legions of investors and institutions are still holding these stocks from
much higher prices. They will sell out their diminished portfolios for years to come.
Many of these stocks are now trading in the single digits
a situation that demands careful
evaluation of position size and risk tolerance. The good news is the massive liquidity and small
spreads of the sector’s largest stocks. These high
float issues c
an trade all day with a single penny
marking the difference between the buying and selling price. This small transaction cost has
another advantage. We can safely juggle in and out of a position several times to catch the best
Most Net ralli
es are only bear
market bounces. This fact raises the odds that resistance at stocks’
day moving averages will extinguish their progress. In fact, the king of the jungle we’ll look
at today should encounter that gorilla very soon.
So play the Net ral
lies and enjoy the good old days. But keep those stops tight and take what the
market gives you. Fortunately, that could be double
digit gains at these discount prices.