There are four animals in the stock market - The bull, the bear, the cat and the pig (gets slaughtered! Hahaha...)
Whn you throw a dead down from a very high building, it will not die straight away, but bounces off when it hits the ground.
In stock market, shorting (sell first and buy back later)a nose-diving counter can be equally as bad as catching a falling knife (buying on stock prices diving down).
A very good example is Uni-Asia.
The syndicates ramped it up all the way from $0.50 to $2.79, and after distribution, it plunges down to around $1.95 in 1 day. The next day, it plunges further to around $1.60+, and bounces up to $1.95.
If you catch the price (falling knife) above $2.00, you are dead, as the price never comes back to you again.
If you have shorted around $1.60+, you could be emotionally thrown off when it bounces up to $1.95. This shows that a dead stock will bounce too. If you don't know where's teh support and resistant, you will get heard.
If you do notice, Uni-Asia has a few dead cat bounces, but the highs and lows are getting lower, at every bounce. This is because some of the syndicates were caught in this stock. They cannot get out in time. Thus, once in a while, they will ramp it up for 2 days at most, distribute along the way. The retail investors not knowing their style, or not studying its chart or price action, will get caught, especially those who has made money from the previous few ramp-ups. They will think the bull is back for Uni-Asia.
Today, Uni-asia is as good as a dead cat. No more bouncing. Very thin trading volume. What does it tell you? The smart money/syndicates have all left!
If you want to find out more about how the stock market works, here's another story:-
The Monkeys Market ( Satire )
Once upon a time in a village, a man appeared and announced to the villagers
that he would buy monkeys at $10 each.
The villagers, seeing that there were many monkeys around,
went into the forest and started catching them.
The man very gentlemanly bought thousands of monkeys at $10 each,
but as supply started to diminish,
the villagers slowed down and eventually stopped their efforts.
The man then announced that he would now buy at $20.
This renewed the energy and efforts of the villagers
and they started catching monkeys again.
Soon the supply diminished even further, and people started going back to their farms.
The offer was then increased to $25 each, but the supply of monkeys became so little
that it was a almost a miracle to even spot a monkey, let alone catch one.
The man now announced that he would buy monkeys at $50 !
However, since he had to go to the city on some business,
his assistant would transact on his behalf.
In the absence of the man, the assistant assembled the villagers and told them :
“ Look at all these monkeys in the big cages that the man has collected.
I will sell them to you at $35 each, and when the man returns from the city,
you can in turn sell them to him at $50 each.
Deal or no deal ? ”
The excited villagers, smelling a quick-profit killer opportunity,
immediately rounded up all their savings and bought all the monkeys.
Then they never saw the man nor his assistant again,
and there were just monkeys everywhere!
Ladies and gentlemen :
Now you have a better understanding of how the stock market works.
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