CONTINUED....................................
STOCK MOVES: DOWN
Buying a car, a computer, or a new television, only to see it on sale the following
week, can be a big source of irritation. Of course, the same holds
true for stocks. To pay $52 a share one day, then to hear some negative
news and see a price of $42 the next week, is not a pleasant experience. If
the investor’s research and selection are valid, the price will probably
recover and move to new highs. But the price damage on the way down
can be difficult to endure. An interesting phenomenon can occur with a
stock price that appears to keep on dropping.
As the price declines, investors will appear to buy up shares at perceived
bargain prices. If enough of these bargain hunters appear, they can
stop the price drop, but sellers might overpower them. Bottom is where the
price stops declining and goes flat or begins to retrace its upward trend.
On Sale, Limited Time Only
Many investors consider a market “dip,” “pullback,” “correction,” or “bear
market” a buying opportunity. The price is lower, the stock’s on sale. The
Nasdaq Composite Index and S&P 500 Index, 1999-2003
reasons for a price decline can be serious; lower earnings or estimates are
predicted, credit ratings are lowered, or a possible lawsuit or tax problem
has developed. The reason for a price decline might not be so serious:
market correction, profit taking, employee stock distribution, or no newsrelated
reason at all. Whatever the reason for a stock price move, it can be
worthwhile to find out why it is moving before investing.
Information about a stock in question can be obtained from the news
media, the Internet, or by calling the company directly. Calling the company
might be difficult if hundreds of other investors are trying to do the
same thing. Often calling the stockbroker or checking a news service on a
computer will provide the answer. Learning why a stock is declining in
price can enable the investor to form a strategy of buy, hold, or sell.
STOCK MOVES: DOWN
Buying a car, a computer, or a new television, only to see it on sale the following
week, can be a big source of irritation. Of course, the same holds
true for stocks. To pay $52 a share one day, then to hear some negative
news and see a price of $42 the next week, is not a pleasant experience. If
the investor’s research and selection are valid, the price will probably
recover and move to new highs. But the price damage on the way down
can be difficult to endure. An interesting phenomenon can occur with a
stock price that appears to keep on dropping.
As the price declines, investors will appear to buy up shares at perceived
bargain prices. If enough of these bargain hunters appear, they can
stop the price drop, but sellers might overpower them. Bottom is where the
price stops declining and goes flat or begins to retrace its upward trend.
On Sale, Limited Time Only
Many investors consider a market “dip,” “pullback,” “correction,” or “bear
market” a buying opportunity. The price is lower, the stock’s on sale. The
Nasdaq Composite Index and S&P 500 Index, 1999-2003
reasons for a price decline can be serious; lower earnings or estimates are
predicted, credit ratings are lowered, or a possible lawsuit or tax problem
has developed. The reason for a price decline might not be so serious:
market correction, profit taking, employee stock distribution, or no newsrelated
reason at all. Whatever the reason for a stock price move, it can be
worthwhile to find out why it is moving before investing.
Information about a stock in question can be obtained from the news
media, the Internet, or by calling the company directly. Calling the company
might be difficult if hundreds of other investors are trying to do the
same thing. Often calling the stockbroker or checking a news service on a
computer will provide the answer. Learning why a stock is declining in
price can enable the investor to form a strategy of buy, hold, or sell.
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