Just remember the stock of a company is not necessarily representative of the company itself. Stock share price goes up and down based on buying/selling pressures in the market, just like at the used car auction.
If 20 Volvo's in good condition are for bid, but the market buyers simply want SUV's today and nobody wants a Volvo, which indeed is a well-built and safe car, well, the Volvo prices are not going to be as high as they could be. They WILL sell EVENTUALLY at SOME PRICE, and this price is the price the market determines the are worth at that time. No PE mumbo jumbo, no future earnings outlook, debt ratios, nothing. Whatever price the un-wanted or out-of-favor Volvos EVENTUALLY SELL AT TODAY is what the market has determined they are WORTH TODAY. Period. End of story. Its that simple.
Think of the market as "the store." We have all gone to the local store and seen some trinket that was worth minimal value but priced high. "You gotta be kidding me!" we said. "This is junk". However, if we wanted to purchase this item, REGARDLESS of our opinions, feelings, CNBC experts, etc, we MUST PAY THAT PRICE DETERMINED BY THE STORE.
80% of the movement in stock prices is the result of institutional money, such as mutual funds and state retirement plan managers. These people typically tend to be in the top sector at the time, currently they are Telecom, Metal ores, Steel, and Computer Security.
Airlines are way down on the list of sectors (provided by Investors Business Daily).
Again, you and I know SWA is a solid company. No question about that. However the stock price, for the reasons above, is down. The "sector within a sector", the "low fare" carriers, AAI (AirTran), JBLU, SWA, are all down and if you bring up their stock charts they are closely identical. This is a further testament to sector rotation.
As far as "predicting" where LUV is going, well right now, the trend is down. It also is down on high volume the last few weeks, which is indicative of distribution or people exiting positions, usually in favor of something else.
Also note that stocks go down faster than they go up. That is because people conduct "Due Diligence" on the buy side, but on the sell side, if its dropping quickly, most people hit the button on the screen that says "Get the FXXX out" and they just want to get out and ask questions later. For this reason, a stock that is at an all time high for the year, if it "rolls over" on extremely high volume, these are good short-sell candidates since a day or two later the entire planet is off-loading which just kills the price.
Nobody can predict the market, just remember the market is ALWAYS right and its best to be WITH IT not against it. (Dont buy Enron after it left $90 and hit $5 because "its cheap" like CNBC told you to do.)
the above are personal opinions only, use your own judgement
and turn off CNBC and watch Discovery Wings or the adult channels, your porfolio will thank you
