Tuesday, June 29, 2010

holding volatile stocks is putting capital under risk in bear market

Unfortunately I got BKS as the only risky stock in my portfolio and guess what it slumped 20 % today. I took greater risk to cover the loss and bought more which is against the rules of the game. This stock was going below the 30 MA and should not be bought. I am realizing how stock that we think will not go below the 52 week low will pass the low and go even deeper low. It is utterly unpredictable. The last 52 low is by no means a standard to compare it with. There is some saving grace in this gamble. That is after a major fall for say 20 percent there is always a 5-6 raise within 1 or 2 days. To get out of the stock without loss one has to buy that these low prices and sell it at the average immediately. If one holds then it is the worst thing that can happen to the capital. I have experience holding stocks after averaging down. Thats the most dangerous thing. Never never hold a stock after averaging down. Once it comes to that average mine at 14.5 for BKS sell it and get of the danger boat. Though it gives a dividend of 7.5 percent at this rate this stock is too dangerous to hold at this capital and margin money. This stock never when below 13 from more than 15 years. I am hoping it will recover soon. The worst thing is to sell at a loss, the way i did for VZ. Thats the worst thing to do under frustration. I cannot let that happen this time. I am learning the lesson the hard way. Even with the smallest capital and risk buying below 30 day average is such a danger. Fortunately JNJ did not do the same thing. I just held good even though I bought it below the 30 day average. It is a an exceptional stock. One of the best stocks out there. Thats not a volatile stock like BKS. having a volatile stock in the portfolio right now is dangerous. The market will go down now. I have to find some stock to short not hold. This sharebuilder margin account does not allow me to short. That is ridiculous. I should keep this account only for holding dividend stocks and not take any risk. this BKS just counter fired on me.

This stock could be a good buy at these rates and held on. Except for the worst market conditions this stock is not such a bad buy at these rates. Looking at the historical charts, this stock always went up after a drastic fall. And falls like these have happened several times before. There are some stocks that fall 20 percent in a day but manage to recover. The only problem is the general selling market conditions. I am worried if the stock will go further down. I already got stocks on margin now.

I can keep my cool and after reading the CEO conference call, this company is not bankrupt to really worry about it. It will come back soon to at least the 16 dollar level. I am confident. So just hold on.

Apple iphone is going to be sold by verizon now. This stock can go up really high.

No comments: