Investors keep on making the same mistakes over and over again. The circumstances are identical, the scenario plays out in a similar way, only the names differ. The latest in this category of a recipe-for-failure? Iqiyi, the Netflix of China.
“Iqiyi is the Nexflix of China,” and the vast majority of retail investors jumped into this already crowded market. Hence, we had emails on whether or not to cut losses. Many have bought near the top (anything above 45) which is understandable as that’s when mainstream financial media provided never-seen coverage of this stock.
It is hard to understand how this can happen over and over again. Investors being able to take one step back will see that this is a tragedy. There are a couple of guiding principles that each and every investor needs to understand to avoid the trap of failure:
- Financial mainstream media is toxic at best. They are in the business of selling articles, they are not in the business of bringing the most relevant news to investors to help them in their decision making.
- IPOs are always hyped. The major banks need lots of interest as they bought shares at much lower prices. The more interest the higher they can sell.
- Almost every IPO declines sharply after its initial rise. You better wait-and-see before getting in.
- This-one-stock-will-make-you-rich is a myth.
If we check the Iqiyi situation we can see a couple of important conclusions.
Due to insufficient data, we can only use the 240mins chart though.
If the channel on this chart is correctly identified, the price of Iqiyi could retrace back to 29 and consolidate longer around this area. In case it goes lower we may see a price of 23 which comes close to the IPO price.
There is no point trying to bottom fish in this stock because what is going down can always go lower.
In other words, there is no need whatsoever to chase this stock, both for the guiding principles outlined above as well as Iqiyi’s chart.
We advise investors to trade wisely
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