I had to post this note from Briefing.com on the reason(s) for today’s selloff. I’ve been trippin’ off of CHNR for the last several days so when I saw it mentioned I just said to myself “makes perfect sense to me”. This reminds me of how the volume on the pink sheets & bulletin board stocks ramped so much back in the bubble days…
14:32 Color on Market Action
Media outlets playing up today’s market decline as being driven by rumors of the Dept of Homeland Security potentially raising the terror alert level (the rumor has now been denied, and mkts have still moved back to lows). In reality, markets were coming in hard before this rumor began to circulate. Many traders that have been leaning long lately have been waiting for the market to give back some of the recent gains. A far more likely trigger for today’s selling is the price action in speculative China names such as CTDC +80%, CAAS +45%, CTTY +27% and the almost 300% move in CHNR over the past week. When traders see this type of speculative action, they know a top is usually near. And, when they see tech momentum companies deliver mediocre results and still rally (ala, MNST, SIRF, WBSN) yesterday, they know that we’ve entered “blow off” territory. Markets haven’t paid much attention to Terror Alert levels for more than about five minutes, but like to know when they are out there. Because there have been so many false alerts in this area, the initial reaction has been to buy any dip on any alert rumor. If stocks make lows after that, then the assumption is that it is something else driving the market lower — like profit taking and aggressive shorting into inflated names. Hope this provides some color on what is going on behind the scenes.
It really has been interesting what’s been going on with these stocks that have been doubling or tripling within a matter of days on no news what so ever or any fundamentals… The only common denominator is that they have the name China or Chinese in the name of the company, and no earnings to speak… and what’s scariest is that it’s almost impossible to get any real information on these stocks.
These stocks are also being fueled by the constant flow of shorts packing in and quickly getting blown out. What more there, isn’t a message board for a single one of these stocks. Very interesting indeed.
Zaur,
I totally agree with you. I was actually glad I couldn’t borrow any shres yesterday b/c I figured that the bulk of these moves are shorts getting blown out of the water. It’s so tempting to try to call a top in these but that can be hazardous to one’s health/weatlh.
As for message boards, you can start one here if you like – http://forums.tradermike.net/