Special Situations in Trading

“Every so often, when there’s a patsy at the table or a no-brainer in the markets, a mere week’s work can make your year” – Johnny Chan

All stocks have their good and bad days; the difference could be the ratio of good to bad days or the magnitude of their good and bad days (volume). Some trade in bands and others trade all over the place (volatility). Most of us use support lines and set price targets. In doing so, we can usually mindfully speculate with some confidence whether a stock is a steal or not.

When Bear Sterns hit $2/share, many believed it was a steal. People easily pushed the stock back up to $3 dollars and a couple days later (after JP Morgan’s fiasco) it went back up to $10 dollars/SHR. A big investment bank, which was trading at $150 last year and had been riding an uptrend for most of the past decade (excluding this year) hits $2/share. You’re right, Bear Sterns could have gone bankrupt, but both you and I know that the government and the filthy rich who had hundreds of millions of dollars in BSC was not going to allow that. I was fortunate enough to catch this stock at the opportune moment and traded it for a 43.05% profit in a day.

There are others out there; we just need to find them. Though these trades may not be as obvious as BSC (or not obvious at all), they are still out there. Solid fundamentally sound companies out there are staying just a tad above strong support built up by previous years’ trading sessions. Optimal risk to reward set ups are out there. Do your homework. Manage the risk. And a week’s work could make your year.

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