double bottom reversal pattern, page-24

re: georgeaux how to average down Hi georgeaux,

when a buyer is accumulating a large position (by large I mean several % of a stock) you clearly can't just wde into the stock and just buy until you have say 5%.

You either have to buy someone elses holding and cross it, or accumulate.

Accumulation only works for a while though and you run out of sellers at any given depth. At that point you need additional help. That comes in the form of traders.

Presuming in this case that you picked your original entry at a low (or you were able to push the stock down (another story), then you start with a low average and over a period your buying slowely (hopefully) pushes the bid up as you exhaust sellers at each price point.

Now you need volatility.

So armed with a decent hoard of stock you prime the buy depth and hit the sellers hard causing a quick run up backed by a rather impressive buy depth - much of which may be you and/or a few mates.

The daytraders / shortterm holders come charging in for the flip trade helping accelerate the price and when your happy you start to sell into the buying. How well you can go here depends on the strength of the buying - hopefully aided by a helpful announcement.

Obviously you are selling at a tidy profit now at these levels and have the capacity now to push the price down. If you can get the timing right (preferably after you have quietly offloaded a sheetload of your holding at peak prices) then you can crunch the price at which time the daytraders will panic and help you force the price down to cut their losses.

You'll bounce it a few times, happy to do so because you have sold at higher prices and are averaging down your holding price. And each time it starts to bounce the woodducks will come back hoping for a new high.

Wrong. Because you are there happy to hit them again with your newly bought cheaper stock and looking to buy it back again cheaper.

Done well enough and with enough volume you can reduce your average entry price to less than zero.

NEO isa perfect stock to see pro's sharpening their skills upon.

Woodducks though think that 'averaging down' is buying at a high price, then buying more at consequitively lower prices as the price trends lower in the belief that each lower price is an even greater bargain (without ever selling any) until they panic and sell what turns out to be the bottom. A volume spike that attracts the pro's attention to the stock.

Cheers,