Post by
68Charger1 on Aug 18, 2024 9:23pm
FDR: fitting the pieces together
On reflection, my analysis of the impact of FDR fans’ social media activity on its share trading may need clarification. At first glance, I am saying something unremarkable: when a stock price rises on increasing volume, more people than usual talk about it. And viewed on a daily level, the three things do seem to happen simultaneously.
But if stock moves are generally triggered by active traders, and active traders are always looking for an edge, then trying to better understand the game is time well spent. Let’s instead consider the *hourly* level of analysis.
I have not conducted any formal review, but I suspect the jump in unique FDR forum posters per hour, and the hourly speed of page-view accumulation, both precede the acceleration in trading volume. And, as we know from 150+ years of technical analysis of stock charts, volume increases do precede stock price moves.
How much warning will increased social media metrics give? I would guess at least 2-3 hours… but does any serious trader really need more than 30 minutes? He can position himself to take advantage of an impending breakout and still have 15 minutes left to brew some coffee. Even if he has to exit a different holding to raise capital.
All of this discussion is especially relevant as this new week of trading gets underway. As I write this, gold still sits above $2,500 in the Asian spot markets. And we have last week’s impressive breakthrough by Founders. Not to mention the ever-present threat of assay news.
Note that our stock did not “test” the $3.00 mark and then retreat. It waltzed through, and traded more than 100,000 shares above that level before falling back. Next, we witnessed heavy volume marking the consolidation of / retracement from that new high.
Now the path to $3.13 has already been mapped – an important psychological consideration for active traders. And all of this happening close to either side of the margin-eligibility barrier.
Who are the margin-users who might buy FDR next week? Presumably rich, sophisticated, and aggressive buyers. Plus a few emerging giants thrown in for good measure.
Should you join them? Buffett used to point to the rare times Berkshire Hathaway lost 40% of its value in a few short trading days as proof that the theoretical hazard of borrowing was a real threat to your capital.
But if the timing signals all turn green, the rich and not-so-rich alike will probably buy more FDR. I would hate to think any of my fellow shareholders who have had the patience and foresight to build a position in our stock might get squeezed out by another downturn. Ultimately, each of you knows his own strengths and weaknesses best.
Stay strong everyone – don’t get yourself into a corner where you might be forced to sell. Don’t let your shares fall into the hands of those who might cynically operate to cause our stellar management team any headaches. That is the best way you can contribute to our eventual mutual success.
Fortunately, Colin Padget seems to have studied Chris Taylor’s decisions well. FDR’s big block trades last week suggest we know how to accommodate sellers wishing to exit. Hopefully by replacing them with new people equally supportive of our company mission.
On to next week.