What's up with these stocks?

hustler · Feb 12, 2007

What is it with these stocks? Looks like in the movies where they plug some guys heart to the heart monitor and it goes flat...

Why do they gap up and die? I have found many stocks like these...

rarhoads · Feb 12, 2007

I think these are takeouts, the takeout price is announced and the price is pretty much dead until the deal is done.

hustler · Feb 13, 2007

Sorry, I'm not really sure what a takeout is. Tried to google it.
Do you mean takeover? Where another company buys this company in question?

Is there any way to profit from this?

cashmoney69 · Feb 13, 2007

What you see is called an "Island top" and its common when a stock gaps. On this chart eletronic arts traded sideways after the gap until the 27th of november until it turned downward.

http://stockcharts.com/h-sc/ui?s=ERTS&p=D&yr=0&mn=4&dy=0&id=p40067086478

what you see on those charts also happens with low volume stocks, where someone bought a ton of stock..shot up 10+ points, then was dead in the water. avoid those kind.

cm69

risktaker · Feb 13, 2007

When you see that pattern, gotta think...they're being bought out. When the price kind of fizzles into pennies a day they've usually agreed to some form of merger/aquisition.

TradinMadMan · Feb 13, 2007

Definitely takeovers as Risktaker has stated.

Cashmoney, notice those stocks move in cents; not like the $2 range in ERTS.

hustler · Feb 13, 2007

What happens when the deal is done?

Does trading of the stock start again? Is the gap filled? etc. etc.

makloda · Feb 13, 2007

Quote from hustler:
What happens when the deal is done?

Does trading of the stock start again? Is the gap filled? etc. etc.

The stocks usually get delisted sooner or later in light of the buyout, unless the buyout offer falls apart due to a myriad of possible reasons.

taowave · Feb 13, 2007

Quote from hustler:

What happens when the deal is done?

Does trading of the stock start again? Is the gap filled? etc. etc.

Depends if its a merger or takeover,cash deal or stock swap and other fun things...Forget technical analysis in these type of situations...

Leave these situations to risk arbs