The Hype Cycle: A Key to Timing Tech Trades

By Greg Guenthner Jan 21, 2014, 11:21 AM 

Today, I’m going to show you how to time tech stock trades.

The secret to buying and selling these stocks at the right time lies in understanding the cycles of hype, hysteria and the debilitating emotions of the investing herd.

3D printing stocks are the perfect example. And right now, it appears that expectations for the fledgling consumer 3D printing market are soaring toward outrageous levels…

“3D printing is all the rage,” explains the Buyside Notes blog. “It’s a factory in a box – it’s changing the world. With 3D printing, everything you wear will be customized to fit your unique body. It’s this remarkable story, re-cast and re-told by the media that has led us to where we are today – the peak of the hype cycle.”

You’ve seen this hype cycle play out before. The internet was the technology trigger for the rise of the dot-com stocks in the ’90s. After rampant speculation, expectations peaked and the shares started dropping. Disillusionment set in, followed by the best internet businesses starting to stand out from the crowd. Realistic expectations began to emerge — and the standout businesses thrived.

How long the complete cycle takes to play out varies, of course. But you can count on these characteristics remaining the same. Use it as your trading guide…

Buy the emerging technology and ride the speculative wave to the peak of inflated expectations. Take your money and run as close to the height of the frenzy as possible (3D printers could be close to this point). Then, when the crowds of broke speculators finally ship out, you have a chance to buy back into the strongest names and ride them to maturity.

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