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THE MARKET WHISPERER 29 9
Notice how the Citigroup stock locks within a short range of 4 to 6 cents
over two consecutive trading days, with a volume of hundreds of millions
of shares per day?
The large volume of buyers and sellers on each side does not allow
the stock to move, and ruins all chances of a big breakout. This unique
“personality” trait damaged the price and only changed when company
management understood the problem and implemented a reverse split at
a 1:10 ratio to the stock price.
A 1:10 reverse split means that for every 10 shares held, the holder
receives only one without incurring damage to his or her capital, because
all shareholders are adjusted accordingly. The price of the stock then
adjusts naturally, so if the price had been $4 per share, it would now be
$40 per share since only 1/10th of the shares now exist. The outcome was
immediate: volume sank and the stock’s nature altered overnight.
