The Paper Chase

By -

I have a friend who, from what I can tell, has done quite well in this never-ending bull market we’re in. Lately she’s been mentioning to me (repeatedly) a stock I had never heard of called Shockwave Medical (symbol SWAV). It hasn’t been around that long, so there isn’t much data, but you can see it’s been on a tear lately.

I was reminded of an equally impressive stock, whose young stock was virtually identical bar-for-bar, that the same friend had also told me about (and, again, I hadn’t heard of it at the time).

The stock, by the way, was IQ (aka “the Netflix of China”). Kindly note the lifetime high on the left side of the chart. That corresponds to the right side of the chart above. In other words, just when the stock looked unstoppable, it totally fell to pieces and cratered. It was no longer the shiny object in the room.

I guess all I’m saying is: don’t decide a stock is great just because it’s going up, especially if you’re only working with a few weeks worth of price history. It’s just a guess and a gamble at that point.