Trend Following – Why you don't need to buy on the way down or short on the way up.

There are so many stocks in the tradeable universe that I wonder why traders fade strong trends. Shit, I just made a stupid trade fading the S&P a few days ago.

People are short Apple or Rimm right now because they are overvalued and “extended” and are up too much.

Makes no sense. Especially since most of the people shorting on valuation are not going to stick around for the end game – which is the only time that valuation matters.

Let’s take a look today at Apollo. This stock went STRAIGHT UP from the get go – right through the worst bear market in history. STRAIGHT UP! I guess people were going back to school to retrain themselves video games while a robotic teacher in China read textbooks to them over the internet- but I digress.

Through this rise – they are a Phoenix company so I am especially in tune – the media was calling for an end to the run. It was a crushing stock for the short crowd until the first quarter of 2004 – when the rest of the market started catching a bid.

Now the stock is broken and the last 6 months have provided ample opportunity to make BIG money off the change in trend – no fighting necessary.

Yesterday, the company offered up some bad news which is another reason to trade with a trend. The news is generally in the direction of the trend.

After I make a stupid against the trend trade, I like to look at 100 of these to remind myself to say NO to fades. That’s just me :) .