Let's play "Find the Bottom"
Jonathan
Take a look at this absolutely beautiful example of a
panic sell in progress.
The transient (disturbance) clearly begins Tuesday morning
and the previous close was about $12.25. The transient
is a result of the news that this company just sold 5 million
shares to some big investor at a price of $9.75. A classic sell off
due to stock dilution. Notice how many people thought that
$9.75 was the bottom....oops...it kept on falling past the
/discounted price/ the /large investor/ was just given.
Typically large investors get a 20% or so discount for the
big buy.
So, the big question is, where will the bottom be?
Predicting the future of a real world complex dynamic system, comprised
of hundreds of investors, thousands of employees and dozens of
competitors is perhaps the hardest prediction to make of all
And this particular system is also in the midst of a panic/chaos.
How can we predict the future behavior of a complex dynamic system
whose internal working formulae are unknown? How can we predict
what most would consider a chaotic (panic) situation without any
internal detailed knowledge?
It's easy! On a 2d chart a self organizing system is denoted by a scale
independent slope of -1, with a total fall of 50%. (Why is another post)
Adjusted for real world behavior. Which in this case means a very reliable
'false bottom' a bit more than halfway down, and a total fall of some
40% as investors tend to anticipate and jump half-off gun.
A 40% drop starting at $12.25 returns a bottom of about $7.35.
But investors also like round numbers.
So I say the bottom will be $7.50.
With a quick bounce back to $8.50, which is where the transient ends.
And the system returns to it's normal behavior, whatever that is.
Give it a couple of days, and we'll see.
s