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Strategies & Market Trends : From the Trading Desk

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To: David Smith who wrote (2044)	12/16/1997 12:16:00 AM
From: Joe C.	Read Replies (1) of 4969

Christopher: I see a lot of quotes regarding Momentum Traders and the effect they may have on a stock. I also hear a lot about the Nasdaq volatility and your comment about quicker executions on Nasdaq was revealing. However, I wonder if you could help me with some questions that relate to the day ORCL tanked the way it did and stock volatility in general. I don't know if you make a market in the stock but I think your comments would be helpful. What role did momentum traders play that day? Obviuosly people were buying all the stock that was being sold - lot's of money changed hands. I assume some large institutions were dumping as well. However, given that most individual investors follow their stocks by reading the newspapers (although I guess more and more are surfing the net), it seems to me that most of the movement was caused by the profesionals - day traders, market makers, institutional traders and other agency traders. Of this group, who would fall into the "momentum trader" category? I suspect that the individual day traders are not alone when it comes to momentum trading. It seems to me that this market is always overreacting to news - is this caused by momentum trading? If ORCL were listed on the NYSE, do you think it would have moved as much as it did? By the way, I also came into this thread from somewhere else. I tend to buy and hold although I'm quick to sell when I'm up 10-20% or down 5-10%. Actually I've been upping these percenatages lately because it seems that most all stocks have trading ranges of 20-30% nowadays. I used to (10 years ago) buy a stock and watch the price mostly weekly and mostly when reading Barrons. Now I find I have to keep up on them very closely. It seems that the same stocks I bought then - such as GE or Disney - go up or down in a month as much as they did in a year. I bought MERCK a few weeks ago expecting a very nice to me 15% per year. I sold it three weeks later when it hit my target. My wife asked me if I ever planned on holding on to anything "long term" and I told her that long term seems to be measured in weeks nowadays. Joe C.

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