Jan,
I'm not, as you know, a technical trader, but I've done some study on the subject, so I think I have an answer for your question. From a classic Benjamin Graham value investing point of view, Kim's statement does seem odd. Why would an investor feel better buying a stock at $17 than at $14? Value investing calls for one to buy companies that are undervalued and hold them until such a time your opinion changes. This has been my approach with Microvision.
Technical traders don't look at the world this way. There are many schools of thought on technical trading, but I'll just cover the one that I think Kim is talking about. There are all sorts of technical traders out there looking for momentum. Their basic strategy is that a stock in motion will continue to stay in motion (up or down). So, their challenge is to identify stocks in motion.
These traders, therefore, set up parameters looking to confirm that a stock is moving. Their confirmation process involves models of predicted stock behavior based on historical price movements. One of these confirmation methodologies involves a simple price threshold. If a stock exceeds (or falls below) a certain price range then they buy (or sell) the stock.
Bottom line, you have to take off your value investing hat to understand how a technical trader looks at the market.
Stephan |
