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Strategies & Market Trends : A Simple List of General Do's & Dont's of Trading: -- Ignore unavailable to you. Want to Upgrade?

To: posthumousone who wrote (514)	2/1/1998 8:55:00 AM
From: Arthur Tang	Read Replies (2) \| Respond to of 769

Thank you, Gary. You have to understand the market making system, first. Then, when market maker buys the large limit order, he has inventory to move out. If it is 250,000 shares(accumulation); he will move the price up 15% the first day(distribution). Then move up the same amount each day until all the inventory is sold and then he has to sell borrowed stock. When he sells borrowed stocks, and when the buyers run out; he will pull back the price. That is the fundamentals of market making. However, there may be some investors dumping the stock when he tries to move up. That will stop him right away from moving the price up. Which is not often, unless the company is really a dog ready for bankruptcy. It is not often also because, investor always want to watch what will happen to his stock; which has appreciated, before he sells. This "vertical jump up in the curve" phenomina, also called "blowout"(or "blowoff" like a whale, if it is temporary); some times created the 300% jump then slowly come down in price. You see many curves in many charts like that on many stocks without any future. It usually happens after many month of base building when the market makers accumulated. That is why professionals watch stocks on the 1 minute interval intraday charts to see the accumulations and distributions going on. The subsequent distribution is also called "technical rebound".