Tuesday, March 28, 2006

Insider News

Go to Level 4! ---LVLT (Level 3 Communications Inc.)

LVLT is today’s winner. It jumped 71 cents or 15.9% to $5.18 after the network operator raised its estimated quarterly operating income target. The news was released this morning.

But wait a second! Why does Its 5 days chart shows the advance is started from 3 days ago?

Ha-ha! Another perfect example for insider news!

In the past, I have noticed a lot of similar situations. Fortunately or unfortunately, there are and will be a lot rumors or real insider news on the Wall Street.

From my experience and study, whenever there is an unknown (no news, no sector impact and no market environmental change) price jump, you should always follow it. At 85%, that stock will continue to going up.

This afternoon, a reader asked me whether should buy a stock when its price is gone high already. I think LVLT would be a good example.

To decide buy or not buy a stock, we should focus on its price potential, not on its history. For the past a few days, LVLT has increased from $3.5 to $5.2 for almost 50%. Someone might think he missed it already, and its price is too high. But from my point view, it has room still.

If you buy at $5.2, you won’t get much benefit as you bought at $4.0, but when the price going up continuously, you can still get something. If you don’t have another better choice, it is worth to have a small portion of it.

There are reasons for LVLT, but I don’t want to pollute your thinking here. Let me give you a simple fact: Today, its volume is 135 million, which is 16.5% of its outstanding shares. The ones who sold the stock are for taking the profit apparently; the one who bought it is for take the profit too. The reason, and the only reason, to the buyers is because they believe the price will go up!

My suggestion: Buy (6.5)
Instruction: When see a possible adjustment, take your profit; when the adjustment done, buy back the shares. It is good for short and mid term stock trading.


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