StockFetcher Forums · General Discussion · Question<< 1 2 >>Post Follow-up
wamphraywater
58 posts
msg #30836
Ignore wamphraywater
1/26/2004 10:28:09 PM

If one does not know, ask the experts......What causes a stock (VRA) to maintain a range of between .25 and .26 for months at a time ?
Thanks.


EWZuber
1,373 posts
msg #30858
Ignore EWZuber
1/27/2004 8:52:21 PM

I'm not an expert but here's my take on it.
First I think it is important to have a theory as to the how and why stocks move.
Lets say that a stock has been dropping for a few days, falling from a cycle high that saw some pretty good gains. There will be some relatively big players in the stock that have not closed their entire position by the time the stock breaks trendline support or stochastics roll over indicating distribution mode has begun.
Often many retail holders are just starting to get anxious at this point.
This selling of overhead supply would probably come to a halt much sooner if there were little fear or enough support ( buyers ) to hold the stock at a higher level, but as the price continues to drop it spreads fear and stockholders then dump even more shares which drives it lower which causes more fear, etc.
Buyers that are accumulating near some kind of support area will try to hold the line to prevent increased fear and an erosion of their position that is already established. If it goes too far they may not have the capitol ( or want to risk it ) to hold support and their buying power will be swamped by sellers.
Consequently they will try to keep the price within a range and slowly buy up the shares of sellers. Its called Basing and can last even a year or more depending on conditions.
When the overhead supply begins to dry up often the buying will ease off too, as big money coaxes out those last few shares at a low price. Here you will see end of day volume dropping. This ( when combined with a nearby support level ) often indicates the stock is near a bottom.
They usually wait until level 2 is clear of big ask sizes and auto execute sellers are all sold out at this level.
Then when it seems like there are no more sellers of significants near this basing level the big money will start to buy in block trades at market. This drives up the price extremely fast. This does a couple different things. It excites retail traders into jumping in and running the price up even faster and also it prevents big money buyers from having to pay big bucks over time all the way up to get the price several percent higher.
After all their goal is to make money. So after they run it up when there is least resistance, they begin to sell at this new higher level to the momentum players.
Since the bulk of their accumulation took place near support there is a good buck to be made selling into the strength ( buyers ) that this run has generated at this new higher level.
Often I have seen big money try to break trendline resistance thinking that sellers were just about gone, only to find that they were just waiting for a higher price to sell into.
In this case the breakout often fails and Big Money then has some other tricks to try to force these sellers into selling at a lower price.
One trick is that they just pull their bids tilting the supply/demand to the sell side or maybe even throw in enough selling to drop the price below support enough to cause a slight panic in the minds of the hold outs. Now the guys that were waiting for a higher price start to experience a bit of fear that they missed their shot and maybe the stock is not going higher. Consequently they sell at the now lower price.
Big Money gets these shares at a relatively dirt cheap price while getting rid of overhead supply.
Then when they have done all they can at this level and volume is once again drying up they test the waters again bidding the stock higher just enough to see who shows their hand.
If all looks quiet they will hit the stock with another round of block trades at market again.
This is also why stocks that are at new all time highs historically go on to produce the best gains over time, because there are no holders that have bought at a higher price and desperately want to get out at break even.

VRA has broken a 4 year Resistance Trendline right at the start of Sept.03. This is long term bullish and in this case is supported by improving fundamentals. After basing for about 2 months Big Money suckered in retail investors with a huge gap up in the morning on 9/4 from a close the previous day of 26C to an open of 37C. Notice that most of that 56 Mill. shares was selling volume as the stock closed at 31C.
I'm not certain about this ( I invite other views on this ) but I suspect what they do is place a large number of limit/stop buys at 37C. No one is going to sell at a lower price if these buyers will buy only at 37C. This generates excitement in non-technical traders thinking that they need to jump on board because the stock is up by double digits. Only they do not realize it is not because of an initial demand for the stock but rather because of trickery.
Often times they will gap it to open right at resistance selling into emotional hands and it's down hill from there.

If you draw a trendline from the high of 9/9 @ 37C to the high of 12/8 @ 32C to todays high, you can see that today the stock hit this TL Res. and bounced down.

I would watch for this TL to intersect the chart at a future date and if you take it down to the 5 minute chart level you will probably be able to see the exact moment that this stock breaks TL Res. and moves higher.
Big Money will try to accumulate as much as possible during this period in a somewhat controlled and orderly fashon, knowing already when and where the break higher is likely to be attempted.
Sorry you asked? JMHO



travlr
80 posts
msg #30862
Ignore travlr
1/28/2004 1:00:07 AM

Zuber,

Nice elaboration! Thanks.

travlr


wamphraywater
58 posts
msg #30880
Ignore wamphraywater
1/28/2004 11:38:00 PM

To EBZUBER,
I thank you very much for the time you took to give me such a detaied and imformative answer, very interesting, thanks again.
Cheers


alf44
2,025 posts
msg #30882
Ignore alf44
1/29/2004 2:08:09 AM

Nice response EW !

Perhaps a less verbose answer could've been articulated with just 3 letters !

P O S !!!



alf44 :)






EWZuber
1,373 posts
msg #30892
Ignore EWZuber
1/29/2004 5:30:12 PM

alf44
Whats that supposed to mean?


jthehut
124 posts
msg #30894
Ignore jthehut
1/29/2004 7:28:53 PM

I thought I was the only one that was misinterpreting P O S
(it's not piece of sh** I hope)
~the hut~


wamphraywater
58 posts
msg #30899
Ignore wamphraywater
1/29/2004 11:00:05 PM

EWZuber,

Don't let someone who posts his I.Q. deter you from responding to others, it is appreciated,

Cheers


alf44
2,025 posts
msg #30900
Ignore alf44
1/30/2004 1:37:59 AM

Lighten up...it was a joke !

Geeez !


alf44


alf44
2,025 posts
msg #30901
Ignore alf44
1/30/2004 2:01:23 AM

...and as for "wamp" throwing around insults about IQ...

Waaay outta line IMO !!!

EW gave you his long-winded explanation and I summed up mine with 3 letters !

You don't like mine...fine ! But take the insults somewhere else pal !


Regards,

alf44






StockFetcher Forums · General Discussion · Question<< 1 2 >>Post Follow-up

*** Disclaimer *** StockFetcher.com does not endorse or suggest any of the securities which are returned in any of the searches or filters. They are provided purely for informational and research purposes. StockFetcher.com does not recommend particular securities. StockFetcher.com, Vestyl Software, L.L.C. and involved content providers shall not be liable for any errors or delays in the content, or for any actions taken based on the content.


Copyright 2016 - Vestyl Software L.L.C.Terms of Service | License | Questions or comments? Contact Us
EOD Data sources: DDFPlus & CSI Data Quotes delayed during active market hours. Delay times are at least 15 mins for NASDAQ, 20 mins for NYSE and Amex. Delayed intraday data provided by DDFPlus