Ticker,
Another long post!
Yesterday VLNC closed at 17 1/2 (close enough to the 18 level!). I would have liked it slightly above 18, but I can take 17 1/2 and round it off to 18.
What happened yesterday in NASD and DOW? Market technicians would give us several reasons. My non-scientific, "gut feel" conclusions are as follows.
NASD did not close down 23% lower, rather it made up most of the loss on the same dayand only showed a modest loss for the day. If it closed down 23% for the day, it was a market crash, similar to the Oct 87 crash. (I remember that day. Amgen went down to 7 bucks or so, I recall! Never saw such a bargain for AMGN after 1987.)
Since NASD gained most of its intraday loss, we call it "correction". Correction is good. Crash is not good.
Correction is good because it took out most of the gamblers with margin accounts, cleaned up some hyped up stocks with no fundamentals, stop loss orders, panic daytraders, etc. If you believe in Fibonacci theory, NASD retraced to the 38.2% level with its intraday low (38.2% lower from the high since its uptrend starting around October 98). I use numbers to suit my theory, of course!
The reason why the NASD made up most of the losses is obvious - quick portfolio adjustment, bargain hunting, etc. etc.
What about VLNC? It went as low as 13 in the intraday trading BUT closed at 17 1/2 for the day.
With the record volume of shares being traded yesterday, online trading could have been delayed and open market orders could have been at the mercy of Market makers, who were trying to balance their orders. I was not worried about seeing an intraday low price of 13 for VLNC. Why? VLNC's fundamentals have not changed. I would not dare to extrapolate the low price to lower prices or misinterpret the low price as market's valuation of VLNC potential. jmo.
What did I learn from yesterday's panic trading? Bargain hunters were there buying VLNC and other stocks at basement prices. At current prices VLNC price may still be a bargain to those that believe in VLNC fundamentals. This morning's price gain may confirm.
What happens next?
Volatility is the way of life for the general markets. Greenspan is determined to increase rates to cool off "irrational exuberance". Abby Cohen has turned cautious.
The volatility will affect individual stock prices. Individual stocks with good fundamentals will be affected briefly - only briefly - but they will hold their long term uptrend as long as their fundamentals remain in tact. VLNC fundamentals are good, I believe. I would guess that coordinated short attacks on VLNC will be fewer and will get weaker in the future, in spite of Castle Creek's ability to provide "cover". Waiting for the next PO announcement, 10K and the conf calls with positive news. jmo. Ram |
