I want to talk to you about the "pendulum theory." The pendulum theory is an old theory we developed on Wall Street, when a group of American market manufacturers collected fresh foods that lacked solid foods in a few hours. [Liver damage is an occupational hazard to market makers, as these academic discussions will begin half an hour after the market closes and continue until the bar closes.]
According to the pendulum theory, the more stocks swing, the more stocks swing. If the stock goes too far, it will go too far.
On the other hand, there are a lot of quiet stocks that don't fluctuate at all, but most are not penny stocks. If these quiet stocks don't swing in one way, they won't swing in other ways.
The potential feasibility of this theory is that stocks have certain financial and structural factors that determine how they move.
Small companies are usually more unstable than big ones, because fewer purchases or less news can make stocks more.
If there is a reliable small amount of stock in the hands of the public, that is, a small amount of "floating", the stock will tend to swing more violently because it can slow down the supply of any purchases into the stock. [Note that floats can change over time as people who sell stocks according to rule 144 or other sources increase.]
If the company is profitable and its value depends to a large extent on these gains and a small profit margin, then any expansion of the profit margin will produce a reliable large change, resulting in a price. For example, one company has a profit margin of 1% and another company has a profit margin of 10%. If both increase the profit margin by 1%, then the profit of the first company doubled, but the profit of the second company increased by 10%.
In the case of pennies stocks, their prices usually depend on the effort and attention of the public. The old adage "Stock does not buy, they sell" app. In other words, there are many people looking for small companies to buy stocks. Instead, companies must work hard to get people to buy their stock.
Another decisive factor in stock volatility is the existence of possible news. If the company is waiting for a deal like many of the companies we're discussing here, then a lot of news will make the stock grow fast.
Finally, the attack by predatory short sellers may increase volatility.
Another aspect of the pendulum theory is momentum. Momentum only means that general penny stocks, especially reversed M&A stocks, tend to keep running during exercise. They are one-way streets for a period of time until the pendulum turns.
As the stock fluctuates, the pendulum moves up too far, then moves down too far and then moves up too far. Over time, stocks may start to become more and more unstable. Therefore, the momentum of stock movements may become smaller and smaller.
This is a typical feature of some of these stocks, the momentum makes them go too far and they are very unstable and trading dangerous. But it will bring more fun, and sometimes even more profits. Travel at your own risk! As always, we tell you that this is an adventurous investment, don't use more money than you can afford, and do your own homework. Please include some floating ideas and other factors that affect stock volatility in your analysis. You can find more data in my book, how to find home run inventory and how to choose a hot reverse merge penny stock.
Orignal From: Pendulum theory and popular stocks
No comments:
Post a Comment