Forum Archive Index - May 2002

[Phaedrus <Phaedrus@techemail.com>]

Snoopy,
       "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? >>>>   
 We are supposed to be looking at this from the perspective of a new buyer. 
Over a period of two months or more, the price they would have to pay for AUO 
shares had fallen steadily, 20% in fact, from 68 cents to 54 cents. That sort 
of downtrend!

 "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 >>>>   
 Snoopy, I do not see how you can claim that this was not a "real" downtrend. 
The money saved by waiting as the share price fell was certainly real enough!

"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 >>>>  
 There is no separate market for the new shares - it is completely artificial 
to separate them out. The market price of the new "composite" share was 
falling. We are looking at this from a new buyers perspective, remember. Their 
entry price into this stock was clearly falling.

<<<< How can shares that were issued at 45c be in a 'falling wedge 
formation' when the price has gone to 55c? >>>> 
 What was paid for any particular shares is totally irrelevant. Even if you 
paid only 10 cents, the price had still fallen from 68 cents to 54 cents, in a 
Falling Wedge formation.

<<<< 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? >>>> 
Snoopy, again, this is totally irrelevant. I don't know. I don't care. It makes 
no difference because they are all the same. I don't know who I bought from 
either. Or what they had paid. These issues are all totally irrelevant. 

<<<< 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. >>>>
 This is a specious argument, and not worth a serious response. It also has no 
bearing on the question faced by a new buyer of this stock, specifically, when 
to buy.

              Phaedrus.

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