Arnie,
Interesting concept, "today's action looked like an attempt to shake the trees and some weak hands fell out before order was restored at 5".
This theory would make sense if, whoever is shaking the trees is trying to accumulate 'below value' stocks at a lower price, prior to a price run-up. I don't have a clue about the fundamentals let alone the value of this stock, but I do know something about the psychology of trading the market, and experience in technical analysis.
What generally happens with the "so called unsophisticated long-term investor" ("weak hands") whose actions are governed by 'fear and greed', he(she) will hold on to the stock (generally with no upside price objective) as long as it continues to go up. If after an extended rise in price, the stock drops below an acceptable price, fear takes over and the 'long-term investor' reasons to sell just as soon as the price reaches the previous high. However, when the price reaches the vicinity of, but does not equal the former high, our "weak handed" investor (governed by greed vowing not to sell until the high price is reached) will hold on till the next lower price is reached.
This "roller coaster" action will continue for a extended decline, until the price drops below the entry price.
Now that a loss has occurred in the position, new ingredients are added to this disastrous scenario, pride and ego. Pride in the sense that our short term oriented "long term investor" will not admit to others to taking a loss, and ego which will not allow one to admit to him(her) self that he(she) is less than a good investor. The net result is that emotions force the investor to hold on for a protracted decline until finally the price takes a large drop on increasing volume. This final drop, like a bad roller coaster ride, convinces the investor to give up and sell. This is the "shaking the stock out of weak hands", but it happens after several downward price cycles over a protracted period of time.
In the instance of 'BBA', those with "trailing stop loss" sell points are generally the first to capitulate. In my opiion (IMO), not enough time or downside price activity has occured to cause this "shake out" phenomenon.
As to your statement, "We've now had our 62.5% retracement...". How do you measure retracement? Do you calculate on a daily basis, or on a major price trend reversal as a ratio of the price recovery to that of the price decline?
According to my calculations, on a daily basis (6/30/97) the retracement was 86%. On the major trend reversal the retracemant was 29%.
According to my TA indicators, 'BBA' is still in a distribution pattern, with a very good chance that price will go to $4.75/sh., and if that gives way to $4.50. Be patient with this stock, don't buy until a buy signal is confirmed.
Harry |
