Forum Archive Index - July 2001

["Peter" <pmaiden@xtra.co.nz>]

Phaedrus -  keep at it.

 

I posted my reponse to Andrew without reading yours and was only looking at a longer term chart. The chart you posted does show a classic support turning into resistance. Everybody - look closely at the detail in the movement in the period shortly after RNS penetrated the support line at 85.The price tried to go back above 85 five times or so and failed each time.

 

Andrew - you need to wait for a new uptrend to start before buying. Even then the RNS price will meet resistance at 85 and something special will need to go above that level.

 

No wonder RNS has headed further down.

 

How prices do move at certain levels of support and resistance is interesting.

 

There has been research done on how much charts rule the sharemarket - especially where markets have high volumes.

 

Despite what the fundamentalists say and how they value particular stocks there is evidence that short to medium term movements in stocks are driven more from what charts say and some computer driven logic.

 

This is contrary to the view that the market ( eg supply v's demand) says a particular stock is only worth say 100 and nobody will buy much above that (at a particular point in time)  - rather that when the price hits say a resistance level of 100 the power of traders using charts and stock trading software sell and push the price down.

 

Hard for some to grapple with believing this is how the market works. One great example is Micron Industries (MU) on the Nasdaq. If there ever was a stock that belied all fundamnetals and is a genuine trader driven stock that is it.

 

Phaedrus (or others) - any thoughts on this?

 

Cheers

 

Peter