Forum Archive Index - May 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Phaedrus,
 
>
>
>Try viewing this problem from a different perspective.
>That of someone wanting to buy this stock.  These 
>people all want to buy at the lowest price possible.
> 
>
>

OK

>
>
>We can see from the chart that prices were 
> in a secondary downtrend, steadily
>falling from a peak of 68 cents. 
>
>

Really?   How do you explain that to the people who bought shares in 
the placement at 45c.  The price went *up* to 55c.  What sort of a 
downtrend is that?

>
>
>Nick would have us
>believe that this was not a "real" downtrend, not a
>"real" falling wedge, but was "rather, a normal response
>to a flood of cheap shares entering the market". 
>
>

I agree with Nick

>
>
>Fact is, the price was falling, 
>whatever the reason(s) 
>
>

Only the price of the existing shares fell.  The price of shares 
issued in the placement rose.

>
>
>and the
>longer you delayed, the cheaper they got. So, when to
>buy? Obvious - when they stop falling and start rising.
>
>

Yes

>
>
>When they break above the trendline, breaking out of the
>falling wedge formation. 
>
>

How can shares that were issued at 45c be in a 'falling wedge 
formation' when the price has gone to 55c?

If you bought into AUO on 15th May, did you buy pre-existing shares 
or shares that had been created as a result of the placement?

>
>
>It seems to me that the root
>cause of this wrangle is that some of you want the price
>chart to reflect the underlying "worth" of the stock. It
>does not do this, cannot do it. What it does is of much
>more use. It shows us the true current market value of
>the stock at any time - what you would get if you sold,
>
>

Ah, so this means that if a company agreed to purchase shares on the 
last day of the placement at 45c, then sold them the same day for 55c 
on the market then it would make no profit, by definition.   Because 
the shares opened at 55c, all trades were at 55c and the share closed 
at 55c no profit was possible.  The market value didn't change all 
day so this must be so.

SNOOPY



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