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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: chester lee who wrote (2480)	7/5/2000 8:51:19 AM
From: Q.	Read Replies (2) \| Respond to of 2506

Congratulations, Chester. Looking at charts for stocks that were going to be added, I saw that some of them went DOWN sharply in the last couple of days. These stocks were at the bottom end of the market cap range for the preliminary) list that was pre-announced by the Frank Russell Co. (which says that the final list will come out in mid June). I suspect was was happening is that index funds were determining, on their own, what the final list will consist of, based on market cap, and some of the smaller entries in the preliminary list weren't going to make it, because of relative price movements compared to other stocks during the last couple of weeks. Thus, I suggest in picking longs from the preliminary list, look at the market cap and avoid those near the bottom of the range. Looking at the charts, I would agree that a 8-10% shift in the last couple of days is typical. I think the best plan would be to enter a position about 4 trading days before the change. During the final day, price changes and volume were often extreme and rapid, compared to the stock's usual trading pattern. There's no way most small investors could watch a basket of these stocks closely enough to trade them optimally during the last day, so I would set a limit price to do the trading for me: I'd set the limit to exit at an 8% gain. BTW, I think the index is reconstituted only in June, not in December. It's an annual thing. Remind me next year :-)