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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Joe C. who wrote (2048)	12/16/1997 1:13:00 AM
From: Robert Graham	Read Replies (1) \| Respond to of 4969

Here is my thinking on your question FWIW. Those who are more familliar with momentum plays on stocks please comment. Momentum players are just that: traders who trade on the momentum of the stock. This means that the momentum needs to be already well established before they jump on the train. They do not create the momentum where there was no mementum before. The momentum player's participation does increase the upward momentum of the stock. So momentum players would not be involved with any stock tanking. They are not bottom fishers. They look for stocks that have demonstrated strength in the market and have established upward momentum. I suspect they tend to follow the more well-followed companies since this is where the action would be found that they can profit from. Now once the stock started to show weakness in the market and declining momentum, or negative news does come out like a negative earnings surprise, then the momentum player can quickly exit the stock. The stock at this point would go through a relatively steep decline. I suspect institutions do not make momentum plays: they deal with too much money when purchases and sales are made in a stock. However, I imagine they do look for stock of companies with good prospects that has stock with good relative strength and other positive attributes in comparison to the market. But institutions cannot wait for the breakout to occur before entereing a stock. They need to start accumulating before the stock's behavour attracts the momentum players. I hope this helps. Otherwise, I think Chris or Steve can help here. Bob Graham