I rarely post about share price, but I will on this occasion.
When it comes to price, all spec stocks have much in common. Simply put, they go up, and they come down. In fact, there is a basic rule of thumb that represents the movement: the amount of downward pressure is inversely proportional to the previous amount of upward pressure, or put more simply, what goes up.......... you get the picture.
Furthermore, the seemingly more robust is the story, the more applicable is the formula. Why is this the case when it seems counter intuitive that a company with a great product or service has a falling share price just when everyone is becoming aware of the said story that is so attractive?
If you were to ask the trolls, they would respond by saying that the product or service is not going to work etc, or whatever it is that will generate a failure. But they are generally wrong on this analysis (because their motives are not to be factual, but to be detrimental).
Rather, the price falls because the stock market is a means to make money, and traders and investors have different time frames to do so. These days, there are more traders than investors in spec stocks, and their financial targets are bound within very small time frames. Day traders and short term traders are the significant force in spec stocks, unlike higher valued stocks where superannuation and other large funds invest longer term. The result of this is that the price is pushed downward as shorter term traders exit their positions. Importantly, as their are no larger funds involved, except for the brokers allocated with cheap shares, there are no large funds to support upward buying, and the well allocated broker houses privy to the cheaper shares exit just when things are lifting off. We should add that the downward price often causes an escalating fall once stop losses from amateurs are hit. All this results is downward pressure on the price until a happy base is formed where the larger holders and day traders have mostly exited. From here, volume reduces, and the price stabilizers, as is the case presently with BIT. However, often prices continually fall, albeit at a slower rate, as amateurs exit due to impatience or other reasons.
As we have seen in recently with BIT, the short termers exited on the recent highs, and since then the price stabilized somewhat while their volume is consumed. From here, amateurs will continue to exit causing further price reduction, although as we all know, this is relevant to their sentiment on the next positive news catalysis. If for example, news did not arrive as expected, the price would proportionally decline, while on the other hand, if positive news arrives quickly, the price will rise relative to the strength of the news. Then we do it all again.
Occasionally a spec stock comes along that hits the right notes with all kinds of investors, and a steady price growth becomes more the norm than the contrary. BIT is not at this stage yet, but that could change for any company with the right catalyst.
So what will happen in BIT's case? The immediate exiting by traders has already occurred, and price stabilization has arrived, but not necessarily for long. If on no news tomorrow, further short termers will exit, and this will continue with no news over days or weeks. However, not every stock is the same. I've been discussing in terms of generalizations. Sometimes the story is strong enough for investors to take advantage of short term lows, which then keeps the price up, or at least, keeps it from falling further. As we see presently, there are those who are accumulating at these prices, preventing any further rapid fall. My guess is that tomorrow this will continue, all things being equal of course, that is, no news. At worse, no news might see further short termers exit forcing a little more downward pressure.
Personally, I hope so, as Friday's is when I receive Daddy's allowance, and therefore are my buying days. I don't think we've filled the 10.5 gap yet, and there is another further down. Doubt that we'll go there tomorrow even without news. That will take another uneventful week.
What did that great trader say about being greedy when others are fearful. Of course, it only works in certain conditions, and my research tells me that this in one of those occasions. Hopefully see you all at 10.5 tomorrow, or I might just have to jump in at 11.
BIT Price at posting:
11.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
