Supply and demand in stocks?

This is a discussion on Supply and demand in stocks? within the Technical Analysis forums, part of the Methods category; Originally Posted by Rhody Trader Something a lot of folks don't understand is that prices actually tend to move most ...

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Old May 28, 2010, 4:40pm   #8
Joined Feb 2002
Re: Supply and demand in stocks?

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Originally Posted by Rhody Trader View Post
Something a lot of folks don't understand is that prices actually tend to move most aggressively in the absence of available opposing orders. For example, all it takes for prices to fall very quickly is for prospective buyers to pull their bids.

I haven't seen it but I can believe it must be true - if there's no buyer at an auction, the auctioneer always drops the price.Its a long time since I watched level 2 but it is a little surprising to see orders, bids and offers changing but no transactions seem to be completing.
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Old May 28, 2010, 4:42pm   #9
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Re: Supply and demand in stocks?

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Originally Posted by Rhody Trader View Post
Don't forget that technical analysis is not the only driver of stock purchases and sales. There's fundamentals as well. If a fundamental trader figures XYZ is worth $100 then he is going to tend to want to buy at a price below that which offers them a perceived good return. Even within a TA view you have to also account for the fact that folks operate with various time frames and strategy approaches.

Not sure about that one in practice John. Fundamentalists can find 100 ways of valuing a share: every broker out there has a different buy target and price objective for any share, every fund manager the same I suppose. Hard to think there's enough consensus to move the price at a predictable level.
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Old May 28, 2010, 4:56pm   #10
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Re: Supply and demand in stocks?

SanMiguel started this thread
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Originally Posted by Rhody Trader View Post
Don't forget that technical analysis is not the only driver of stock purchases and sales. There's fundamentals as well. If a fundamental trader figures XYZ is worth $100 then he is going to tend to want to buy at a price below that which offers them a perceived good return. Even within a TA view you have to also account for the fact that folks operate with various time frames and strategy approaches.
The more people doing one thing or following the TA, you'd think the less you want to do it.
For example, everyone knows the support is at 90, in theory that should just be ripe for the taking of people's money by the institutions but I guess the fact there are buyers there means that the price cannot get pushed down too much? I suppose the institutions would be buying there as well hence the support?

FA don;t tend to buy day in day out though, so when you see an index bounce off support, it can;t be the same FA traders buying again...well it could be but I class that support as intraday trading.
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Old May 29, 2010, 8:31am   #11
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Re: Supply and demand in stocks?

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Originally Posted by SanMiguel View Post
For example, everyone knows the support is at 90, in theory that should just be ripe for the taking of people's money by the institutions but I guess the fact there are buyers there means that the price cannot get pushed down too much? I suppose the institutions would be buying there as well hence the support?
You've no doubt heard of stop running, which is basically institutions looking to profit by triggering standing orders at key S/R resistance levels.
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Old May 29, 2010, 3:16pm   #12
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Re: Supply and demand in stocks?

SanMiguel started this thread
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Originally Posted by Rhody Trader View Post
Don't forget that technical analysis is not the only driver of stock purchases and sales. There's fundamentals as well. If a fundamental trader figures XYZ is worth $100 then he is going to tend to want to buy at a price below that which offers them a perceived good return. Even within a TA view you have to also account for the fact that folks operate with various time frames and strategy approaches.
Quote:
Originally Posted by Rhody Trader View Post
You've no doubt heard of stop running, which is basically institutions looking to profit by triggering standing orders at key S/R resistance levels.
Sure, which is why price usually pushes past an obvious level and then bounces but why the bounce - because all the stops are being hit? You'd think if stops were hit it would push through even further.
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Old May 31, 2010, 3:07pm   #13
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Re: Supply and demand in stocks?

SanMiguel started this thread For example, many buyers went long at 90. After price moves in their direction a reasonable amount, they move all their stops to break even.
The next trading day, price returns to 90 and the institutions drive the price to 89.5 to hit the stops. The stops are sell orders so why does the price then bounce upwards from the support?
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Old May 31, 2010, 3:30pm   #14
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Re: Supply and demand in stocks?

Once the sells are filled, we would possibly see consolidation around 89.5, not a V-shaped single bottom, but the trader who has been throughout or who is now in cash would probably see the pattern as a pull-back of some description in a good uptrend and try to get in long.
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