Why do trading volumes shrink for shares that languish and stay close to a bottom
If people are selling their holdings at a loss after they've accepted reality that the stock won't be moving up and/or use the capital losses against other gains, why is there usually accumulation albeit at very small amounts? Is it mainly be speculators who are anticipating a turnaround or insiders scooping them up?
Just looking at many mining or even other companies especially listed on the Venture Exchange, it seems that is the pattern -- big swings then the stock bottoms for 1-2 years with very few shares being traded and then a month later, the stock price moves up favorably.
When you see low price and low volume for a long period it indicates that there is little interest in the stock. When a stock is under accumulation you will see a rise in volume and in price or at least, a floor under the price. Trend traders look for a spike in volume accompanying rising prices. This indicates greater interest in the stock by investors, even if there is nothing in the news yet.
When we get a good bottom in the stock market which we haven't seen for over 30 years. If you mention the stock market people will tell you they do not want to hear about it they will want nothing to do with stocks
There's lots of different types who could be buying.
First there's the executives and board members who are required to be buying. The idea is that if they have no skin in the game, their decisions might be different from a shareholder's perspective.
Then there's those who didn't know anything about the company before the drop, decide that at the current prices and with the future business prospects, they want to get in.
Some didn't sell so when it gets low enough, they put more money in to cut their cost down to the point that a reasonable gain puts them back into a profit. (I fit this for three stocks over the last year).
Insiders aren't reported on frequently enough but they are reported on. Some speculators use large increases in insider buying as a factor to decide they want to buy as well.
Some in the penny stock arena figure there's no way to know which of the ten or so companies in the area they like is going to do spectacularly well so they will buy into all ten. The idea is that while some will lose, some will be mediocre and the top ones will gain so much that it the losses will be more than compensated for.
Some are money manager friends of key players in the company who will put a small % into the company. If it doesn't pan out, the manager will point to the other gains and if it does work out, everyone including the people they are connected to are happy.
Basically - there's lots of possibilities where other than the insider trading that is document as well as possibly the executives/board members, I'm not sure how one would figure out that for stock A it's speculators and company executives while stock B it's mainly investors new to the company.
Thanks for all the explanation.
It seems there are some diamonds in the rough that can be had on the Venture Exchange. They are not risk-free but could be 2-5x bagger if not more in the long run as long as the global economies hum along.
I seem to recall that the Venture Exchange isn't a totally free market, though it might have changed.
In any case, with stuff like ARG trading on the TSX (52 week $0.10 to $0.83) I haven't felt the need to go the junior exchange.