Hey folks,
Despite a modest amount of great calls, I do occasionally become wrapped in a stock pick. Color Kinetics (CLRK) is one of them. The funny thing is, we never realize how crappy the stock was since the begining until AFTER we get our a$$ handed back to us. Looking at the chart, I begin to see an ugly and inconsistant chart pattern that should've been obvious from the start. Also, the stock had run up before earnings. This is usually a hype thing, rather than a logical behavior. Most stocks actually experience a little sell off before earnings a released. A positive move such as that shows over confidence in a stock and this is not always a good thing. If everyone is long and everyone has high expectations in the stock, then what happens when, God forbid, it falters by just a cent? There you have it. Also the chart pattern was a double top formation. Besides the high expectations, thats about it. Still, its more than a handful of good reasons why I shouldn't have bought the stock. Too bad I couldn't see all those reasons before I put my hard earned money and good faith in CLRK. Never again. I plan on learning from this mistake the best way I can. I used to just simply use insider buys and technicals and chart patterns to pick stocks. This definatly works, but it misses out on other important key factors, such as earnings growth. I thought CLRK would have earnins growth, but those other factors should have deterred me from buying. I should've waited AFTER earnings were released and then made a decision. Anyways, a new strategy is to focus on stocks showing tremendous earnings growth, after the fact that they showed the actual growth (beat the numbers). I will post some stocks in the next post. Later...
