I haven't heard "the rumor", leaving me only with what you had posted. I understand better the point you were making. When you have a chance, as much as possible, can you detail exactly what "the rumor" is?
Is STRX simply accepting invitations, are they on the auction block, are any specific companies mentioned, was a time-frame mentioned (I did read on the thread one post suggesting Dec. 4th or 6th, which we can safely conclude is probably not true :o), or potential justification? Would appreciate, but also understand that by definition rumors are hard to nail down, thank you.
I spoke with my dad, he indeed did bottom fish, but in August when it gapped down substantially. He said STRX was an excellent candidate (he mentioned KR, and to a lesser degree SWY, as current examples of what he looks for).
He uses charts, list of stocks making new 52-week lows, and a statistic used to measure where institutions are investing their own personal money (not their clients) based on data that is published in the Wall Street Journal. He is not concerned with fundamentals, uses news in an attempt to better understand the chart and statistic, and mentioned the time he holds ranges anywhere from a day to well over a year.
As a contrarian, he loves bad news, and gets worried when he hears only good news. He mentioned STRX was an excellent example of what to look for when long-term bottom-fishing, since it had come down so far, in a long and painful manner, and almost without interruption.
He feels in August even the diehards became frustrated, the price capitulated as they sold shares at any price just to get rid of them, and that the stock is basing, and at the beginning of a new long-term upward trend created by a whole new wave of buyers.
He believes based on experience, but cannot confirm until the data he needs is published, is that the surge in volume is not composed of individual investor who at this point most likely think "I don't want that crap", but rather institutions (aka "smart money") beginning to build a position in STRX.
The volume pickup is well within reason, sawtooth volume patterns are beginning to form typical of accumulation, and the absense of any signifigant news tells him the stock is moving for no good reason, except for one ... smart money in, dumb money out ... that's how he looks at it.
He said to watch for a few telltale signs as we move forward.
Look for volume to form textbook sawtooth patterns, characterized by price surges on heavy volume, followed by slight and gradual price declines under decreasing volume, until the process repeats itself. Nature (especially human nature he said) does not cause these patterns, smart money does.
Look at intra-day charts for buys that occur late in the day, usually in the last 15 minutes, especially on Fridays. Smart money buys late in the day to cover their tracks, and minimize the opportunity for others to follow their tracks. Look for price patterns that are "clipped" and very uniform, the intra-day high and low will sometimes remain unchanged the whole day. Also, look for increases in intra-day volume that closely approximate a normal curve, a telltale sign of computerized trading.
And as soon as smart money is in place, he said without fail we should begin hearing some good news, estimates for improved earnings, gradually rising analyst upgrades, and talk of an industy-wide turn around, as smart money begins sucking in funds from individual investor to pump up the value of their already in place investment.
I detailed this information thinking someone might benefit from these methods, it might be interesting to some, my matter-of-fact dad has absolutely kicked ass investing this way, and he really took time to explain the reasoning used in reaching his conclusions.
His parting comment was that smart money would know of any real potential buyout long before we even heard any rumor. In many cases he feels they ARE the source of the rumor, and whether or not anything materializes (which he said in this case very well may), smart money will already have put themselves well in place to benefit regardless of what transpires.
He recommended this book, something he reads at least twice a year (haha, I told him that was nuts, and he agreed):
Contrary Investing, The Insiders Guide to Buying Low & Selling High, Band, Richard E. ISBN 01400.88628
Best of investing to all, I only have a small position in STRX at $10 I had completely forgotten about, otherwise I would have sold it long ago. I would have used it to buy more of the only stock I have right now; 100% invested in the best company I can find, one with impeccible characteristics, and one I can count on to provide a 100% annual return, rarely more but usually not much less. He thinks I'm nuts, but what works for one may not work for another ... that is why I always tell him I would NEVER invest like he does, and why i have dubbed him "the garbageman".
Take it easy, I read my post, I think I did read too much into your post, sorry :o)
Regards, JB |
