Top Pro Trader Brian Shannon – Stem Cell Stocks

In BUSINESS OF STEM CELLS on August 26, 2009 at 6:07 pm

Brian: I understand the fundamentals of a lot of companies. It’s a fine balance. For example, I’ve traded the stem cell stocks over the past few election cycles. Bush was going to veto them and Obama promised to give federal funding to stem cell companies. So, watching the television and headlines made me realize this issue was coming into the public perception. Then I look at the charts to see whether the stocks have already made a move. If they have, I will dismiss them. If not, I will start stalking the stocks and wait for evidence that larger players are accumulating the shares. Then I will establish positions as the stocks start to break out before big volume starts coming in.

But you have to be very active and attentive. In the case of stem cells, the stocks plummeted the day Obama signed the bill. It was a classic case of “buy the rumor, sell the news.” The problem is these companies are years away from making money or bringing things to market. Ordinary investors at home don’t recognize this. They just think, “Wow. That’s great news. I’m going to invest because maybe it can cure diseases.” This person is going to be late to the game if they are investing this way. Unfortunately, it’s simply a matter of not understanding how the stock market works.

via Top Pro Trader Brian Shannon | Day Trading on NYSE.

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