Hi Ali Chen; That chart is a "stair step", (or at least that's what I call it), and it is not a bottoming formation. It's an indication of new lows continuing to break down to the downside.
MMs actually try to avoid holding much stocks overnight. But institutions do, and when they sell, they tend to sell into strength only. They do this because if they sold into weakness they would crater the stock price badly. The overall charting effect is that for the period during which the institutions are selling, the stock falls every time the Nasdaq drops, but then fails to rise when the Nasdaq rises. (The institutions put out limit orders and sell into the rising pressure.) Here's a stock chart to look for this condition with RMBS, judge for yourself:
siliconinvestor.com
It looks to me like an institutional selloff, but it's not the most obvious chart on the subject I've ever seen.
Another tendency is for mom and pop to make trades overnight, that get executed at market open, while institutions trade all day long. So if a stock is being distributed by the institutions to mom and pop, it will tend to pop up at the open, and then decline during the day. The easiest way to see this effect is with a candlestick chart. The solid rectangles are days where the closing price was lower than the opening price, while the open rectangles are the opposite. If a stock is going down, it should have lots of black rectangles, no news there. Where there is an indication is when there are too many black rectangles compared to white rectangles when the stock is steady. That is an indication of institutions selling to small guys. I would say that Rambus has this stock pattern, at least since the March 15th Markman Memorandum:
siliconinvestor.com
But just because institutions are selling to mom and pop is not an indication that the stock is doomed. Mom and pop are well known for possessing gonads (note usual term is male specific, but doesn't include "mom") of steel.
-- Carl |
