NNCP explains stock rise todayThis theory is called the Vinnie Nearing News Contrarian Paradox (NNCP) .
This is what explains the increase today.
When a stock is beat up on bad news . like ELD, and all future known potential bad news has been factored into the price, the odds are claculated as follows and there are 2 steps:
Step 1 :
Assume a 50% black or red roulette wheel probabilty to begin with. Then calculate probabilities
and weigh the positive and negative odds as follows:
-Satisfactory fourth quarter results given the price of gold - 70% chance
- Obtaining greek permits - 70% chance
- further degradation of the Turkish situation - 20% chance
-Successful drilling at Lamaque 50% chance
-gold price going up 50% chance
-takeover - 15% chance
-gold sector returning to being favored after bitcoin or market collapse - 30%
-good hedging strategy for ELD - 50%
-ELD going down another .50 - 20% chance
-ELD going up .50 - 66% chance
-positive surprise - 50%
-cashflow problems - 10%
-book value being reassessed at less than half the current value - 20%
-China letting the gold price collapse, they protect their investors encouraged by the state - 2%
-All producers continuing to produce if gold goes down below $1200 - 20%
-etc etc.
Final calcuation = favourable odds , better than 50%, go to step 2
2)Determine when to enter the market
Statistics will show that being a contrarian upon entry into a stock is the best on a day that it is expected to go down, that is either when gold goes down massively or real bad bews. The 3:30 pm investor today chose to enter when gold is in a big down day.
The best time of day for a purchase is probably sometime in the hour before the last 15 minutes, I used to study this stuff and would opt for that because of the stability.I dont know if this was a trade within the same brokerage house or was it between different brokers, this counts a lot too since I suspect most volume these days is just moved by computers between themselves as they reassess every microsecond the buy sell volumes and gaps
Conclusion: That is the Nearing News (being likely positive news) Contrarian ( enter on days the stock should go down) Paradox (it is not logical).
This is also why other gold stocks were slightly upwards today, many stocks in the gold sector have the end of the world factored into their price and the writedowns are mostly behind now. thereis no more known bad news to hear from, only and mostly good news. A good time to enter was when gold is really down.