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Biotech / Medical : GUMM - Eliminate the Common Cold
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To: DanZ who wrote (2708)10/22/2000 3:15:38 AM
From: Mike M  Read Replies (1) of 5582
 
Dan, I have this theory. I have been curious why the panic posts of old news. It would almost appear we stumbled across a deer frozen in the headlights.

Then it hit me.

Its just a theory, mind you, but this is how it plays out. Remember the "cross trade" we were looking at about a week ago. Seems it was just before the arrival of the unwanted guest to the thread.

If I remember correctly it would seem to work like this: 35K shares were purchased at 16 3/8 and 35K shares were sold at 16 5/16 (hard to make money on that even with volume but the scheme is simple enough). First you land on a thinly traded thread after a little news and try to intimidate its shareholders. Coinciding with a general market decline helps. The idea is to walk the stock down by selling your long position. Doesn't even require an up tic to sell...If you do it effectively you don't have to pony up all the margin because, as the theory goes, shareholders panic and throw their shares into the mix and the stock price drops precipitously. The idea is once shares collapse the short position can be closed for a nifty profit. In this scenario, the long position gets traded at a loss as shares are forced to fall but the short position more than makes up for it. Nice in theory.

But what if shareholders simply don't cooperate? What if as you are selling the stock down to 14 almost nobody else is selling? What if you suddenly find yourself running out of stock to sell and the stock starts walking back up? What if there is so little selling when you aren't that the stock seems to spurt every time you purchase back a little? Hey you can huff and puff and find two year old "news" stories but that may not be enough to dislodge entrenched shareholders. <g>

What happens if one day suddenly there is a delicious piece of news regarding a huge dental gum contract or a preventive study publication or jv exploration or something...?

Now I realize it is only 35K shares, but wouldn't you hate to have to buy it back a whole bunch higher? That's just it. I don't know anybody who wants to sell at these levels once that little supply is exhausted. Tough to buy back in a thinly traded stock, huh?

Yep, we may just have a deer frozen in the headlights. Sometimes cutting one's losses is the best course of action.
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