DAYTRADING Fundamentals Message Board

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Strategies & Market Trends : DAYTRADING Fundamentals

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To: marketbrief.com who wrote (3609)	9/5/1999 1:16:00 PM
From: Robert Graham	Read Replies (2) of 18137

In very bullish markets I can see where splits can cause buying interest which can have the stock move through previous resistance comparatively like "a hot knife through butter". But we are dealing with a different crowd buying and mentality when this happens who are attracted to relatively quick money gains in their stock. The buying on this type of anticipation can cause good surges in the momentum in the stock, both before and after the split occurs. So even though the price action of the stock will not handle resistance in the same way, I still think the chartist will find that the same set of resistance levels are still there, but now altered mathematically by the stock split. There has been cases where I saw the behavior of a stock transformed relatively quickly with a new crowd that ended up trading the stock. Changes in character for a stock is not that uncommon. For an example of this, look at the stock of companies that have been reporting as a pattern an acceleration in earnings increases. In the right market environment, this stock can end up turning red hot and be traded by the momentum crowd. This can significantly alter the trading characteristics of the stock. But I still find S&R to remain true. Trade management still would change. JMHO. Comments anyone? Bob Graham PS: Another example is when the stock sells off because of surprise fundamental news of a devastating nature to the company that was before this event considered a very good high growth stock. The stock ends up trading much differently in character than from the way it traded in the past. Traders who keyed off of earnings growth rate now are replaced by value hunters and turnaround players that look to book value in making their trading decisions. Meanwhile a new kind of day-to-day speculation can periodically move the price of the stock around, particularly before earnings announcements with a new management in place that has made promises.

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