Trader Mike

Michelle B submits:

LP, in a recent comment to this blog entry, expressed interest in understanding trades based on capitulation. Capitulation means that there are no more sellers for the moment, and the stock price will rebound sharply. The most important aspect is not to confuse capitulation with the low-grade drip, drip of continuing distribution, better known as the infamous falling knife. The two down legs shown in the chart below are distributive in nature, though quite vigorous, while the third and final leg down represented capitulation. Another important aspect is being able to know when they are happening—in my case, it’s my watching the hi/lo ticker that finds these kinds of trades.

I just read a post at Funiveristy entitled “Nova’s Laws Of Money: Money Is A Thought“. It’s about the fact that money is just an idea.

How can somebody pay $50,000 or $100,000 or $250,000 or even more for a Patek Philippe watch while you can get a good value watch for $100 or $200? Because the company behind the Patek Philippe watches instilled this thought into some people in the world, to whom money is just an idea, that that is what they are worth.

It reminds me of people who think that there are ’safe’ stocks. Like my man Jesse Livermore once said “they’re all worthless!” Any stock’s/company’s valuation is just based on perception …