It's fun to be right, but being "right" about entering a stock trade is irrelevant if you're not also going to be right about the exit. With that in mind, though yours truly only suggested Chinanet Online Holdings Inc. (NASDAQ:CNET) yesterday, it's time to go ahead and lock in your gain - your 140%-ish gain - by selling CNET at whatever price you can get for it now..... like right now.
This isn't going to be a popular premise among those who just piled into CNET today, after seeing it soar. It's the right thing to do though. When the market puts something completely unexpected, a little illogical, and completely unsustainable, don't lose sight of common sense - the market will correct its mistake soon enough.
This isn't to say Chinanet Online Holdings shares don't deserve to be trading at $2.40 today even though it closed at only $1.02 yesterday. It's just to say that it's almost infinitely unlikely CNET will be able to hold into its current price. A pullback is in order.... a sizable pullback.
What happened to spark just a rally? A press release issued by Chinanet Online Holdings Inc. yesterday mentioned that it was in discussions with Alibaba (yes, the one with an IPO that's creating quite the stir). The market didn't care to what extent - if any - the partnership with Alibaba would benefit CNET. The knee-jerk response was, it's worth owning Chinanet Online Holdings Inc. at any price if it's dealing with Alibaba... or might do business with it.
And truth be told, a partnership with Alibaba may well be a boon for CNET. It's not going to be a confirmed boon within the next few days though, and even if it is, the opportunistic profit-takers are still apt to outnumber the interested buyers at current prices. It's got nothing to do with what the stock's worth. It's just got to do with the orderliness of the stock's buying/selling auction on the exchanges where shares trade. There's an imbalance that needs to be worked out, and a big part of that "working it out" means a pullback.
To answer the next question, yes, I saw something likes this coming yesterday. I didn't know exactly what, but I kind of figured it was indirectly related to Alibaba. Tuesday's and Wednesday's gains and volume were just too strong to not think that somebody knew something about something that was coming. It's not the kind of thing you learn in school or a book, or from your broker. It's the kind of clue you learn to pick up on after watching the market for about a gazillion hours.... which I have.
Whatever the case, while it's tough to go against the grain and sell what everybody else seems to have just begun buying, trust me - I've seen this before. If you got into CNET on my advice from Thursday, this is as good as the gettin's going to get for Chinanet Online Holdings for a while.
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