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Every Monday at 10 a.m., I have a call with one of Money Map Press' "founding fathers," Bill Patalon. We talk about markets and business and some personal stuff, too.
Early last month, during one of our regular phone conversations, I told Bill that if he owned any Beyond Meat Inc. (NASDAQ: BYND) stock, he should sell it immediately.
That’s because I was looking at these bars unfold on my trading screen:
Beyond Meat Inc. (NASDAQ: BYND) had just gapped up to open and then taken off, eventually jumping an additional 10% in just five minutes. By 10 a.m. sharp that day, the initial $10 pullback had already happened.
My reasoning was simple: much like nature abhors a vacuum, markets abhor a parabola. They can't be sustained. On a price vs. time chart, parabolas are the visual representation of a mania.
Bill didn't own Beyond Meat stock, though some folks he knows did. And Bill had made a great call, recommending the stock on its IPO day when it was trading in the 60s.
I also like the meat replacement producers a lot. The science behind Beyond Meat is incredible. And it's even more so for Beyond Meat's chief competitor, Impossible Foods, whose IPO is expected later this year.
And while I think these innovative companies and their stocks could be good long-term investments, when the market hands you an unexpected and very over-sized windfall, it's almost always wise to gladly accept.
So let's look at some other recent market parabolas and what you can do (and a few things you shouldn't do) when these come about.
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.