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Non-Tech : Littlefield Corporation (LTFD) -- Ignore unavailable to you. Want to Upgrade?

To: Alan Cole who wrote (6077)	12/30/1997 8:35:00 AM
From: SE	Read Replies (3) \| Respond to of 10368

Alan, I will try to answer your question from the limited knowledge base that I have regarding TA. Basically support and resistance zones are such because a great deal of trading has taken place in that range in the past so many shareholders are pshychologically tied to that range. For example, the BNGO chart: www1.bigcharts.com I tried to set up that link as a 9 month chart. I don't know if that worked or not, but 9 months was what I looked at. I printed the chart out to examine it. Back in Aug we hit 7 and pulled back to 6 1/8 or so. Then in Oct a fair amount of activity was spent in the 6 3/4 to 7 1/4 range. Also, if you examine the warrant chart a fair number of warrants traded in that range. THis is an odd one because we have shareholders who bought through the stock BNGO and shareholders that bought through the warrant. Warrant shareholders will add their warrant basis plus $5 and that number represents a physchological number for them. I was off on my range as the stock traded to 6 1/2, but it held 6 3/4 on the ask pretty well, so I wasn't off much. What happens is the people who bought at 7 and watched the stock go to 9 were very pleased with themselves. However, if they did not sell they saw their profit disappear. When we hit 7 on the way down some that bought at 7 sold to preserve their original capital, and some new buyers stepped in as 7 was a support level ... many buyers at 7 in Aug. Stocks spend more time trading in ranges than going up or down and therefore significant emotional attachment occurs in various price ranges. Once we broke through support at 7 those that bought at 7 were sitting on losses and now that we have returned to 7 they are even and probably happy to exit and get their money back. They sat there in fear as they watched not only their profit disappear, but also part of their principal. 7 now becomes a resistance area as people trade out of their stock to get their money back and new players step in. In my mind a resistance range is more significant on the way back up from a significant loss as many were very fearful holders through the loss period. 7 to 5 represents a significant percentage loss. How much time we spend in this range will depend on the number of warrant holders that converted at this level. It is a bit of a tough call, but we could be here for a few more days. Incidentally, I was happy to see us holding 6 1/2 to 6 3/4 yesterday on relatively high volume. It indicates churning to me and many weak holders are being flushed out of the market. Without verifying, I think a lot of the block volume we saw yesterday occurred at these lower levels. Incidentally 6 1/2 to 6 3/4 represents approximately a 20% move for those who bought in under 5 1/2 and that is not a bad profit in a couple of weeks. They will tend to take it and move on. Those that are buying at these levels will have a longer term time horizon and should be good holders for us as we wish to see the stock move higher. My next area of resistance is the 8 1/4 to 8 1/2 range. If you look at the chart we spent a bit of time in this range in both Oct and Nov. Once we get there the 6 3/4 to 7 1/4 range will be a support area. Incidentally, 8 1/2 represents again, about a 20% profit for those who by in the 7 range. I tend to think that 20% profit levels are signficiant, although this is my assumption and may be incorrect. If that 20% deal holds, then 10 becomes our next resistance. This can be a significant one because we have to deal with the 20%'ers, 10 is a round number and therefore mentally significant and the old high is just above 10 so people will look to sell out around this number as it represents the highest the stock has been. After 10, your guess is as good as mine. In fact, right now your guess is as good as mine. <<gg>> If you want to trade this stock, you should have been selling at 7 1/4 and buying at 6 3/4. Next sell point is 8 1/4 to 8 1/2 and then the buy area is 7 1/4 or so. Stocks don't go straight up, they move up, consolidate a bit and then drop back and move higher once again. The BNGO chart for the last 9 months shows this action very clearly. However, one of these times when we hit 7 1/4, we will break through and now the 7 1/4 will become a support zone as we move higher. Same thing will happen. As we move higher and then pull back to 7 1/4 mentally, people will not want to see their capital disappear and they will sell. Others will buy as this is the support zone. Whether it holds or doesn't is simply dependent upon the number of buyers vs the number of sellers. Now that statement was profound, wasn't it! :) Others will use moving averages for support and resistance zones. These, I believe are longer term support and resistance. The reason is somewhat of a self-fullfilling prophecy. Those who look at TA are all looking at the same charts and therefore, all reading the same signs. I don't know if this adequately explains it or not, but Elder's book is a good one and explains the physchology of stock trading rather well. GO PACK GO! -Scott