A spinoff stock such as AOL always comes with a story and stories are dangerous if taken for more than they are worth.    For example, this recent Wall Street Journal article brings us a look at some of the “good” and the “bad” stories about the AOL spinoff.  The WSJ is passing on views from some very smart people.

What’s the danger in a story?  Lots as it turns out, especially when they are good ones well thought out and well written.

Stories are dangerous because they feed your desire to “know” what’s going to happen next.  And, thinking that you know what’s going to happen next in trading is like putting on blinders if not a full blindfold.

Someone once argued that the purpose of all thinking is to be able to stop thinking.  ”Ah, now I’ve got it!  Next.”  The big problem is that it is the very nature of our lives that we don’t know what is going to happen next.  Maybe all charts should  be printed with a big blank space over there on the right side where the unknown is lying in wait.

Given the possibilities for AOL in the WSJ article and those from other sources you may find, is AOL a good bet?  It is a spinoff, and that puts the odds in your favor.  It does seem to make sense to get it apart from Time Warner,  another positive.  And, the observation that the ratio of ads on the internet to the number of hours that eyeballs are on webpages is relatively low scores a big positive.  On the other hand, there are negatives too.

So, yes,  AOL does look like a candidate for a watchlist to me.  It is a reasonable place to direct some of your precious attention.  Is it’s stock price going to go up and outpace the market.  No one knows!  No one!

Watch your charts.  Watch price and volume.  When the stock breaks out by whatever criteria you have set in you trading plan,  buy it.  Just let it come to you and stay away from fortune telling.

Tags: AOL, spin-off stock, stock spin-off, trading plan, TWX