Quick. Stop the stock. It popped too quickly. On Wednesday, trading was halted in DNDN because too many people wanted it too quickly. The stock jumped 15% within minutes as millions of shares were traded. Investors and spectators watched for news. There was none. The stock started trading again and settled back down. Evidently the pop meant nothing to most. For me, I’ve seen other such signs as evidence of hope and latent optimism. Pops can produce that.
In rational markets, and for theoretical companies, stock prices move in reaction to financial news. Every quarter the company reports its finances, and every investor hears the same news at the same time and can react as quickly as anyone. In the real world, analysts, researchers, and speculators lead a charge by buying or selling in anticipation based on quantitative analysis. There’s a reason for every move.
In irrational markets, like the one we’re in now, emotion rules. Fear or greed drive busts and booms. Remember booms? They do happen but the last one was so long ago that most people only recognize it as story, not as a possible reality. Fear has driven the markets since 2001. Good news is disbelieved or at least heavily discounted. Bad news is amplified and used as cause for retreating from investing in anything intangible. Financial instruments have evaporated. Countries are ready to default. Gold is eternal. Gold is $1,700 an ounce. I remember thinking $600 an ounce was too much.
DNDN is up to $8.34 after dropping down to $6.46 from a high of over $54. Its drops have been associated with increasing revenues. Below average expectations have been the excuse to drop the stock. I began to fear that the stock price would not recover. Then it popped.
Stocks rising in anticipation of positive earnings rise over the course of days or weeks, sometimes months. Stocks can rise from other news too: buyouts, product launches, regional expansions, competitors losing their advantage, etc. When I see a stock pop like DNDN did, it suggests to me that there are many investors on the sidelines watching the stock, waiting for an announcement that they can’t time. A rumor hits the mill and fast fingers fire off orders for shares in anticipation of significant news and price rises. If the rumor or news is inconsequential, the stock falls back. But rather than be disappointed in the decline, I concentrate on the sign that others know something potentially significantly positive.
For DNDN, I suspect the news is related to a buyout (which I think has a low end of $60, but in this market could be lower), or European approval for Provenge, the prostate cancer treatment. MVIS has similar pops anytime a rumor links them with Apple. Apple has released patents that include embedded projectors. Microvision makes the necessary components. Apple is very secretive about its product releases. It is easy to imagine Apple springing some new, innovative gadget onto the consumer market that suddenly makes Microvision profitable. Christmas is coming up. How about a new i-something that ends up on every wish list? Take Apple’s design style and apply it to Intel’s game controller with the Microvision pico-projector. Speculations are easy to make.
Pops are easy to discount and ignore because they usually retreat because the rumored news rarely becomes real. For a whlie though, pops didn’t form. Fear was so pervasive and optimism so out of fashion that good news fell like a tree in an unpopulated forest.
Pops aren’t limited to stocks. Good news can pop up anywhere. We may be able to move faster than the speed of light. Cold fusion may succeed. Financial reform may result from the efforts of the Occupy Wall Street movement. Unexpected resources, help from those we know, good weather can be found without warning. It tried to snow last night. Today the sunshine is melting the ice from the roads.
Something about Dendreon is encouraging DNDN. The stock ended the week above the height of Wednesday’s pop because the price gradually traded higher. Maybe the pop marked the turning point between fear paralyzing investors into merely being spectators, and reminding them of the advantages of being positive and long term investors.
As for me, I am an optimist, with internal cautions of pessimism. I’m invested as much as ever because I remain optimistic which also means that when we hear the good news I won’t merely be a spectator. The pops I see reinforce the hope I always have. I hope I’m right.