Danger Zone: 9/15/14

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Is the Big Money Setting a Trap?

Back in the 1980’s there was a scenario known as a “specialist trap.” When a stock rallied without any reason and price traded just beyond a significant reference point.

This action trapped investors into buying new highs. The trap occurs because most investors place buy stop orders at obvious points and only look at charts. They have no fundamental criteria for a high-probability buy.

Without a solid fundamental reason for new high prices the market wakes up and corrects to true value.

What Happens When Revenue Growth is Misleading?

A business is no different than you and I. We pay our bills with cash. The company in the Danger Zone this week has impressive revenue growth, but declining cash flow over that same time.

Revenue growth does not always equal cash flow growth. The lofty relative price of this stock doesn’t make sense.

The New Constructs Most Dangerous Stocks Report keeps you ahead of the traps and tomorrow’s news.

Subscribe to any of our services and get access to each Danger Zone report for free.

All New Constructs subscribers can download the full report here — After logging in at www.newconstructs.com.

Non-subscribers can purchase the report a la carte by going to our reports page and searching for “Danger Zone: 9/15/14″.

André Rouillard and Kyle Guske II contributed to this report.
Disclosure: David Trainer, André Rouillard and Kyle Guske II receive no compensation to write about any specific stock, sector, or theme.

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