The Biggest Mistake Made Trading Hot Growth Stocks

July 17, 2012 by  
Filed under News

QCOR lost more than 20% last Tuesday after gaining nearly 15% the day before. Fortunately, those using our targets already got out with a more than 20% profit (we featured QCOR as a momentum trade in June before it surged 25% higher and reached our target last Monday). Those who decided to hold QCOR after the target sell price was reached made a fatal mistake. And here is why despite the incredible sales and earnings growth:

Certain hedge funds like to pick on QCOR and drive the stock down after positive news is released – making money by shorting the stock. After the longs sell and collect some profits on positive news they come out with a negative article on the stock and drive the stock down as they did in January of this year. Last Tuesday’s negative report and short raid was gigantic – taking advantage of a low volume summer market. The smaller level of trading activity allows them to push the stock lower more easily. A game some hedge funds often play. Those who put in a limit order sold automatically on Monday and got out with a nice profit.

And you could have gotten out with a big profit by just following 2 of our other sell rules. One rule in our methodology is to sell 2 weeks before the earnings release. That would have had you out with about a 20% profit. The other rule is to sell on any negative news. Once the story was released by Citron Research, you still could have sold for a great profit on this trade. But not following those rules and not having a limit order in for your target sell price turned a big gain into a loss.

Now the earnings should be very good and the stock should recover as it did after the last hit piece and short raid in January. But this could take several weeks or more. If the bounce does occur. One of the biggest mistakes made on young, hot growth stocks is to not put a limit order for your target sell price. You want to have that limit order in – especially in a low volume market on a stock that has been the target of short raids in the past.

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