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Microcap & Penny Stocks : FRANKLIN TELECOM (FTEL) -- Ignore unavailable to you. Want to Upgrade?

To: James E. Glover who wrote (23553)	12/20/1997 11:38:00 AM
From: topwright	Read Replies (1) \| Respond to of 41046

James and Gary, If I may I'd like to intervene here regarding the recent price action and my interpretation as to what your are witnessing in the way of tape action ie. 1000 and 2000 share trades, and a lot of piecemealing type of trades. First of all what separtates this years Decemeber activity vs last year can easily be explained in two generalities. First of all 1997 produced huge profits to many, thus making tax selling more exagerated then usual. Secondly, this December we have the Asian effect dragging on the overall markets, thus not providing a decisive direction or lack of that anticipated January rally effect. This brings me to my interpretation as to what you are seeing in the tape action. Since margining has become a way of life in this long running bull market, many people are getting margin calls on their fully listed stocks. $1000 here, $2000 there, $4000 the next day, etc. In the back of their minds they are saying, gee I don't want to sell these hi-tech stocks that have taken a beating, yet will be the first to rebound, plus if I sell these stocks that are on 50% margin, I have to sell twice the amount to cover my $4000 margin call ($8000 to raise $4000). Where do I raise the cash. Gee, lets look at the small third tier holdings such as FTEL, figuring it will not react on the first go-around of any rally, and I can raise 100% cash for each share I need to cover. Thus, the pecking action on the tape. Couple this with tax selling and you have a steady errosion of price, inch by inch, day by day, ever since the Asian fiasco reared its ugly head. Is the above gospel, hell no, but to me it is a more logical explaination regarding the sell off across the board on the micro/small-cap sector. Lets face it, what do you think is going to see the initial rebound in price, Dell or FTEL? If you owned both and you recieved a margin call for $1000 on Dell's sell-off, are you going to dump 25 shares of Dell at $80, to raise $2000 less 50% to cover, or 1000 shares of FTEL at $4 to give you a little breathing room? In the last 10 days Dell has taken a 20% haircut, and yesterday bounced back $3 off the bottom of $75 to close at $78 and change. The question to ask, is what do you think the big money is first going to chase when the dust settles? Then judge the credence to the above margin scenario. Peck, Peck, Peck RB