Page 439 - THE MARKET WHISPERER

THE MARKET WHISPERER 43 5
Daily Behavior of AIG over Several Months

In August 2009, the share’s price leapt from $12 to $55 [1] during crazy
trading days and in volumes of hundreds of millions of shares per day. In
fact, AIG’s story began some time earlier, but without a doubt, August and
September of that year showed the wildest moves in stock trading.

AIG, along with other “public favorites,” can show highly volatile
movement within a single trading day with high volumes and liquidity,
which is why many day traders earn a great deal of money from them.
Public interest causes price spikes, the company is usually assessed at far
above its real value, and most often will not uphold market expectations.
In most cases the share price will drop [2], volumes will fall sharply [3]
and the price will cease showing its earlier volatility. If and when interest
renews in the stock, it will likely “go crazy” once more.

Conclusion: if you really want to “marry” a stock, get married to the way
it is traded within a specific timeframe rather than with the stock itself. It
is far better to avoid becoming “big experts” on any stock, when we know
that within several months the party will be over and we will want to move
on to something else. Stock traders seek intraday entry points that allow
them to trade in that stock once or twice during the same day for profits.
This method works only if the stock maintains high volatility and volume,
and these can calm down at any time or even eventually disappear.

The snowball usually gets rolling only once the institutional players
start buying the stock, pushing its volume and price up, and bringing it to