Salesforce – a company with a market cap of about $180 billion – jumped 25%…
Netflix – a $241 billion company – jumped 11%…
And Facebook – an $865 billion company – jumped 8%…
As I watched the market, I started thinking of the old story about “trading sardines.”
As the story goes, in California sardines started disappearing from their native waters, and so people started bidding up the value of sardines.
When the price was at a ridiculous level, a buyer decided to treat himself to an expensive meal.
He opened a can and ate a sardine…
And immediately became quite ill.
He went to the seller and complained that the sardines were bad – to which the seller said, “You don’t understand. Those are trading sardines not eating sardines!”
These stocks remind me of trading sardines…
No one is looking to see if they are healthy or strong or can support these valuations…
They are just being bid up because there is so much liquidity in the system and the money has to go somewhere. It’s not going to go into bonds with rates as low as they are…
So it goes into stocks.
And tech companies are bid to the moon.
The trick is to make sure you are profiting from the run-up, without getting caught when the valuations drop back to a reasonable level. Pricing like this always reverts to the mean!
My Options360 service is based on making trades that protect your downside while giving you as big an upside as possible.
I did a great breakdown about how we find and vet trades in Options360 with my publisher, Adam Mesh.
We pull back the curtain and explain the trading philosophy, then go through some real trades so you can gain a thorough insight into how we do what we do.
You can watch here… and I suggest you do right now.
To Your Success,
Steve