Separating rumor from news, opportunity from risk
Consider two stocks (labeled 1 and 2) below (click on each chart to enlarge)...
Okay, you will quickly notice that each chart:
1) Includes daily bars since mid-2009
2) Ends on 30 November
3) Mimics the other, eerily so.
It is that last item I call to your attention: Two near-identical trading patterns... that ends, rather abruptly, come 1 December 2010...
Of course it would help were you to know the two companies; #1 is AT&T/T and #2 is Verizon/VZ. "Ahh," you say, "Now I get it!"
You probably do. Rumors abound that AT&T will lose its contract with Apple/AAPL for exclusive rights to offer the iPhone in the USA. But that rumor has been around for a good long while; what's different now?
One rule investors keep in mind is, "Buy the rumor, sell the news." It will be interesting to learn the news from Apple, AT&T, and Verizon in coming days and weeks. And the effect that news will have on their respective stock prices, now that the rumor of something has been priced in; arguably adequately so.
Full Disclosure: Long Apple/AAPL and Verizon/VZ.
-- David M Gordon / The Deipnosophist