Picture speaks louder than words. Here's the outcome when a stock gets hammered by bears and bulls all the time.
The Stock is Groupon
The chart above covers only last six months and see the number of times stock has been hammered up and down. It's not new for Groupon....this trend has been in place for quite some time now as can be seen on weekly chart below
Groupon is an Internet Deals company. It has replaced traditional coupons which people used to cut in a newspaper. Groupon is struggling with a problem: It's not able to demonstrate value to companies that sells offers on its website and hence now investors. The Good news: company is doing everything it can to turn around the company.
Let us look at the chart of last few months once again
Bears kicked the Groupon stock in October from 5.4 all the way down to 3.3. Post selling, it created a barrier at 50 dma. Then in middle of Feb - Bulls kicked the stock up - actually huge gap up got created when it rallied all the way to 4.8 - its new resistance point. Bears got active again and hammered the stock back to 50 dma. Now the stock is trying to hold 50 dma for few days. Does this mean - Bulls will now take this opportunity to kick the stock up again. History says Yes.
There is a fascinating lesson here: Stocks have a typical behaviour and they continue to repeat it. Traders try to profit from such behavior. Having said that - there is no guarantee and just when you think stock will do something - it might not. That's why traders keep a stop loss to avoid getting trapped in hope of such a behavior playing out. Trading this kind of weird behaviour is highly speculative.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers