Lingo Lingo Lingo
In a recent market report, an analyst from another investment firm described the market as undergoing ROTATION. Translation: investors are selling one set of stocks and buying another but no material advance or decline is taking place. Another report (from a Raymond James analyst) described the market as experiencing a BREAKOUT. In general, a breakout means that stocks have lifted higher after a period of trading within a certain range of prices. These two analyses conflict with one another, of course, but that doesn’t really matter – markets are based on people’s differing opinions. The point of interest for today’s blog is the use of LINGO to describe activity on the Street of Dreams.
Webster’s defines “LINGO” as dialect, jargon, or special vocabulary that one is not familiar with. Granted, every industry creates its own lingo. But Wall Street lingo may be the oddest, as it combines sharpness and creativity.
Some of my favorite Wall Street terms that fall into the lingo category include:
- Head and Shoulders Formation – no, this is not about shampoo. It is a technical term for describing a certain trading pattern that you can see on a stock chart. I worry when I hear this term being used to describe one of my holdings.
- Short Squeeze - this is a fun one. It occurs when stocks which have large “short” positions rise quickly. Yeah, I know. That’s not helpful. In English: investors betting against a stock are getting forced (or squeezed) into buying a rising stock to stop their losses from increasing. Short squeezes can happen when stocks are up as described above, or when they have fallen in price and short sellers don’t want to see their profits disappear. I like a good squeeze, but short selling is a dangerous game and is best avoided, if you ask me.
- Dead Cat Bounce – a personal favorite, and sometimes mistaken for a short squeeze. The term describes a stock that has fallen a great deal from a very high price (several recent examples come to mind – they always do), and the stock price is rebounding after this big fall. Say what? Well, if you drop a dead cat from a high enough place… I think you get the point. Yes, this is a bit of a sick term, but quite descriptive.
Funny thing about some of these terms, some people take them very seriously.
Last words on the subject: at times, lingo can be useful and fun. At other times, it serves to confuse investors. Like Bells and Whistles on an investment, defined as special features added to ordinary investments to attract attention, often the value of the features is more apparent than real. Finally, if you hear me using lingo and don’t understand the message I am trying to deliver, stop me. Ask me to explain the matter in plain English. Thanks.
Ralph McDevitt
