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Let's play "Find the Bottom"
Take a look at this absolutely beautiful example of a panic sell in progress. http://bigcharts.marke****ch.com/qui...eq=7& time=18 The transient (disturbance) clearly begins Tuesday morning and the previous close was about $12.25. The transient is a result of the news that this company just sold 5 million shares to some big investor at a price of $9.75. A classic sell off due to stock dilution. Notice how many people thought that $9.75 was the bottom....oops...it kept on falling past the /discounted price/ the /large investor/ was just given. Typically large investors get a 20% or so discount for the big buy. So, the big question is, where will the bottom be? Predicting the future of a real world complex dynamic system, comprised of hundreds of investors, thousands of employees and dozens of competitors is perhaps the hardest prediction to make of all And this particular system is also in the midst of a panic/chaos. How can we predict the future behavior of a complex dynamic system whose internal working formulae are unknown? How can we predict what most would consider a chaotic (panic) situation without any internal detailed knowledge? It's easy! On a 2d chart a self organizing system is denoted by a scale independent slope of -1, with a total fall of 50%. (Why is another post) Adjusted for real world behavior. Which in this case means a very reliable 'false bottom' a bit more than halfway down, and a total fall of some 40% as investors tend to anticipate and jump half-off gun. A 40% drop starting at $12.25 returns a bottom of about $7.35. But investors also like round numbers. So I say the bottom will be $7.50. With a quick bounce back to $8.50, which is where the transient ends. And the system returns to it's normal behavior, whatever that is. Give it a couple of days, and we'll see. s |
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