Speculative fervor on Friday. What happened?!?!

By Duru

November 2, 2002

Just a quick note for those of you that take note of daily market action and the movements of individual stocks.


After seeing a few tech stocks take incredible leaps on Friday (GNSS, NVDA, VIRL for starters), I decided to take a look at the most speculative of all - stocks below $5 (but with 90-day volume of at least 10K). This created a universe of 1290 stocks, most of them Nazz stocks of course.


I was amazed to see that about NINETY stocks popped for 15% JUST ON FRIDAY ALONE. About 25 stocks had gains of 25% or more. I saw a few names that I recognize from the "old days" like CHTR and RBAK and ADCT and TMTA and PRSF and CIEN and VIGN. There were 170 stocks with gains of 10% or more.


I have no frame of reference with what a typical day looks like for these stocks since I don't pay them much attention anymore, but this seems like a LOT.


How about the flip side? Well, only ten, yes TEN stocks in this universe declined 15% or more. Only 27 stocks had declines of 10% or more. The biggest decline was 28% (the biggest increase was 81%!!!!). And as you can imagine advancers outpaced decliners - about 60% had positive gains, 32% had negative gains, and the remaining were even.


The action on Friday seems so dramatic in this universe that it has to mean *something*, right?!?! Well, let's compare with the statistics since the Oct 9 lows for some more perspective.


Screening for action since the Oct 9 lows, I come up with 233 stocks, that's almost 20% of this universe, that have run over 50% gains. 78 of these have doubled or more and have names you might recognize like BVSN, ITWO, OPWV, and VTSS. There are some, like ASKJ and NUAN that have *already* doubled and corrected a bit and look ready to make another run. And how about this for sheer madness: RSTN has almost tripled and NIKU has quintupled!


A whopping 492 stocks (38% of this universe) have had gains of 25% or more. And, get this, 996 of these stocks, that is 77%, 77%!!!!!! have had some type of positive gain. We are in dart throwing territory with these stocks!!!! Note that this universe completely cuts out stocks that WERE under $5, but have since broken through that barrier - I can only imagine the monster gains THOSE stocks have had. Similarly, the universe of decliners is somewhat skewed by those stocks that have fallen from the land of over $5.


Now of course, you would have to get the lows timed perfectly to recognize the bulk of these insane gains, but, again, the runs on Friday demonstrate the high probability that buying at almost anytime since Oct 9th could have gotten you *something* for your speculation.


Typically, I would say this is a sign that the tech rally is coming to its peak, because there simply is no fundamental reason for most of these bad boys to pop like this. You cannot even blame this on short-covering because most shorts have long abandoned these plays. But the speculative, buying fervor seems so strong, I have to think this is just the beginning of the inevitable climax. Certainly, if nothing else, a lot of the liquidity the Fed may be trying to pump into the economy can explain some of this.




And please note my disclaimer that I am NOT recommending that you play in these dangerous waters. Just sending this note for informational purposes only! :)