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Short Term News vs Long Term Investment


Ok... for those of you that follow my Social Media feeds, you'll be well aware of the perils of short term news, and how it can have an often dramatic effect on the Financial Markets.

When this type of news hits the internet and the mainstream - what mostly happens -  is everyone tends to panic sell off their positions and either take a loss on their initial investment, or they take a significant hit on profits by selling into a panic and I'll explain below why this is nearly almost always a bad idea, and I'll back it up with examples.

The most recent of this type of event that comes to mind - is the Shopify correction within the last week, where Andrew Left of Cintron published a series of Tweets designed for 1 purpose - to reduce the stock price of Shopify - as (wait for it).................................... he had a SHORT position on the stock, therefore he has attempted to demonstrate to the Market and the SEC (Securities & Exchange Commission) what he perceives to be genuine issues within the company in order to crash the price but still make it look like it is NOT Market Manipulation (which it clearly is)

It is important at this juncture to understand who Andrew Left is before we move forward. Simply put, he is responsible for crashing the company Herbal Life and he is also a man who is BANNED from the Stock Exchange in Hong Kong as he was found guilty by a tribunal of the shady practice of Market manipulation concerning trades he made on a well known Asian Real Estate company where he also used his Social Media power to make absurd claims in order to drop the price (EXACTLY what he has done with Shopify on the New York Stock Exchange).

Due to his army of followers on Social Media, who all look for the latest Andrew Left target, he has a unique ability to have a short term negative impact on the share price on his chosen target, just in the same way that Carl Icahn can send out a couple of tweets saying that he thinks Apple is undervalued and it adds 17 billion dollars to Apples value overnight.

The impact of Andrew Left, is no doubt damaging... but this is what sets good traders apart from bad traders - the ability to recognize short term news events apart from the long term company crippling events. 

He does have a bit of "previous" - earlier this year he made multiple attacks on NVIDIA - the darling of semi-conductor stocks which has had a meteoric rise in the last 18 months, and he targeted them in exactly the same manner - prior to an earnings report release which sent the stock plummeting from $170 to $140 in the space of 24hrs (which I should add - triggered me OUT of my long term position) - and in the process wiping billions from the company valuation despite its positive earnings report in July.

If we look at NVIDIA today - we can see that it has recovered fully and at time of writing - currently trades at $188 and I think is the clearest example of why it's a bad idea to sell into Short Term news as a long term investor. In the space of 3 months - the price bounced from $140 - $188.

Short Term news events are indeed humbling - we realize we are at the mercy of the market and the market makers, but it's how you react to the news that will determine your success and failure.

Myself - i prefer to look at the technical's - the price is well above the 200 Day Simple Moving Average Line and has multiple horizontal lines of support before we can say that the bias has switched to Bearish therefore I have up-most confidence in a recovery and it's a stock 1 that I have entered back into with a small position at $92 with a view to adding more once the recovery begins to take full effect.

Is it a stock that I am managing on a daily basis? - Yes, I'd be a fool to let it run without checking the technical's daily, but, for the moment, the bias of the stock is most definitely Bullish, and given the prior history of Mr Left, I see no reason why Shopify will not recover in the same way that NVIDIA did given that it is the Canadian darling of the e-commerce world, and millions of companies worldwide rely on its platform on a daily basis.

Good Traders / Investors do not panic when short term news events hit.... they take advantage of the discount being made available and will look to add to the position.

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