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But if you follow such hypothesis, then the Dow would have followed ORCL's 29% fall last week. Obviously, perceived company fundamentals are at play here, not the Dow.
lml,
There are a couple of exceptions here as I said before. First is during upgrades/downgrades. During upgrades/downgrades different
MM's have different comfort levels for the stock price at that
particular DOW level. At such times the MM's do not play by this
rule. The MM who downgraded the stock uses all his financial
"muscle" to get the other MM's to follow the DOW at the new stock
price. If the other MM's do not agree then it boils down to who
is financially stronger to dictate the right price. After a couple
of downgrades for ORCL, all the MM's "accepted" the new price at
about 22.50 and started moving with the DOW.
With todays downgrade, RSSF (robertson...) seemed to feel that
the current price is appropriate for ORCL and they played by the
'implicit' rules and did not try to push the price lower. Maybe
they will change their minds tomorrow I do not know.
The second exception is when some particularly good or bad news
comes about the company, the economy in general or news about
a related company. I clearly remember the day Ellison said that
"things were looking wonderful etc.." and the stock price went
up substantially that day. But the MM's set right this "anamoly"
the next day by bringing down the price to the level they
deemed fit at those levels of the DOW.
The third exception is when a big financial institution buys or
sells a large porfolio. It is like the elephant jumping into
the tub and you are going to have the stock price move very
stubbornly in one direction. It takes a few days for the
MM's to correct this behavior if they have the financial "muscle".
I have got quite sick of reading the AMAT, ASND, IFMX, MSFT,
INTC threads where everybody seems to be so attached to the stock
emotionally. I do not look at fundamentals at all when I trade
stocks. All I do is to figure out a valid "price range" for the
next day and make corrections to that as new market variables
come in. For example I expected the DOW to go up much more than
what it did today and expected ORCL's peak to be 23 3/4 after
getting over the 23 1/2 mark with a little trouble. May be that
will happen tomorrow but tomorrow is a new day and nothing
could be said about ORCL's trading range until then. So tomorrow
may be a "buy low sell high day" but today was defintely a
"sell high buy low day" but the range was too small to really
do anything.
Anyway I guess much of what I say does not make sense to people
who buy stock based on fundamentals etc for the long term. For me
ORCL is just another stock and I do not have any qualms about
shorting this sucker if it goes up too much out of sync with the
DOW. I guess my posting should go to a thread which involves more
"real" traders who look at things differently as compared to
people who hold on to a stock for more than a couple of months.
Rgds,nanu |
