what should smart investors do when a stock goes through the roof?
Amazon.com and Netflix stock price have been spectacular in 2018 at least until October sell-off grounded the tech stocks. Amazon went north of 2000 not too long ago. Please note that this is over 25% higher than our 2018 price target. Please check here.
Stocks overshoot the price targets usually as the Wall Street is willing to pay a higher multiple for a high growing stock.
Smart investors use caution and become careful if the stock rises too much. If you decide not to sell, at least don’t make new purchases at inflated prices. If you are a regular visitor to our site, you would have noticed that the’MONEY FLOW’ index clearly showed that the smart money was moving out of the stock since the middle of the year. Thus, October high was a time to sell and ‘NOT BUY’.
As we saw in October earning report, Amazon fell significantly even though it had an amazing earning report; guidance was at a lower end though. This is why we like to be conservative as overvalued stocks tend to fall the most even with a slight miss.