Photo: jamidwyer on flickr
Today the cloud computing stocks got absolutely crushed because of a very minor earnings/revenue miss from Equinix.Kid Dynamite concludes, rightly, that when you something like this it means the stock was “priced to perfection” — a perfect storm of good events.
And that has implications for everyone.
Barry Ritholtz today wrote an article called “Do You Want to Be Right? Or Do You Want to Make Money?” where one basic message was “don’t fight the tape.” (What’s “fighting the tape?” Shorting NFLX, for example – that’s fighting the tape. You may think the stock is overpriced, but it’s going higher whether you like it or not – for now at least. It’s a friggin freight train) I agree with Barry’s “don’t fight the tape” advice and I hate to fight the tape – but the problem, as illustrated in today’s EQIX action where the stock was brutally butchered off an announcement that certainly doesn’t seem to warrant a 35% decline in the stock price, is that once the tides turn, investors have little to no chance to take profits or reduce their positions!
That leaves traders in a tough spot – sit on the sidelines and watch others happily gorge themselves at the profit buffet while hoping they’ll be able to escape before the elevator comes to take the stock price down? Or jump right in yourself, and hope that you’ll be smart enough to jump off before everyone else tries to flee a burning building, so to speak? It’s not easy, either way.