RESPECT, EMOTION, CATALYSTS AND TOILET SERVICES
I talk a lot about "respect" in the market analysis sense of the word. It's a daily topic that I repeat. It's a very simple yet powerful concept that not enough investors pay attention to.
I make a consistent effort to humanize the markets. I think its beneficial to have a vivid imagination when it comes to how you perceive the market or an individual stocks behavior. Price action is, after all, a derivative of human emotion. You have very small portions of a stocks trend that are driven by rational, level-headed reaction to the fundamentals of a company. The majority of the trend, including the process of forming a bottom and a top, are driven by human emotion.
Have you ever wondered why a company that has been treading along its 52 week lows doesn't react to good earnings? A promising product release? Or any positive change? Fundamentals don't matter at extremes. Catalysts matter. And it has to be the type of catalyst that gets real investors to pay attention.
You can literally see real investors pour into a stock once the proper catalyst becomes public. That is where you start loading up on the name. That's how you are able to pull large gains out of the market over 6, 12 and 18 months period.
Bad news is that these opportunities do not come along very often. The more bullish a market becomes the less you have the opportunity to find stocks that are dysfunctional enough to present this type of opportunity.
Speaking of opportunity. I mentioned SWSH last night as a potential long opportunity. I also said that the next move - whether up or down - would be fakeout. It moved down today. At one point it was down about 6% for the day. That may be all the bears get from here. The bulls may get their chance to shine here soon.
SWSH
