coincidence?, page-15

I thought you made two important observations Orson. One relates to opinions expressed on HC, the other to market shenanigans.

Every market transaction has a winner and a loser. It is important not to provide your counter-party with behavioural information that might make you the loser. Well-intentioned forum comments such as “if xxx is announced I’m buying because the sp then should rocket to at least yyy”, or “if it breaks through zzz I’m out because the next support level is 20% lower” would be gold to a trader, particularly if those opinions convince other readers as well.

The shenanigans you refer to I think just need to be accepted. Until a company is priced in accord with its value, as demonstrated by reported earnings rather than promised earnings, investor sentiment always will be vulnerable to manipulation. If a company’s fundamental value is obvious to all market participants its share price will become more difficult to manipulate.

Share prices are determined either by announcement flow or cash flow. An announcement that promises good future profits will cause a spike before price slowly falls back, often to the original level if further supporting announcements are not forthcoming. There is a limit to how long investors can maintain their enthusiasm, particularly with profit takers around. When an unexpected inflow of cash is announced the higher price levels generally will be supported.

The lack of price/value correlation for young companies still developing their product markets means that their shareholders don’t have the fundamental basis that would give sufficient confidence to over-ride manipulation. I think it would help to lower our stress levels a bit if it is recognised and accepted that market shenanigans can be expected for listed companies like AJX in their early stages. As you say, they should mean little to the longtermers.

Cheers