Most regular readers of mine know I’m a big fan of the “hundred-dollar-roll.”
If you aren’t familiar with this phenomenon, essentially, its the tendency for traders and investors to be distracted by a big, sexy, (but ultimately meaningless) round number. And 100 is the most common of the big round numbers that captures the fancy of speculators new and old.
And this phenomenon isn’t new. In fact, in Reminiscences of a Stock Operator (the greatest trading book ever written, in my opinion), Jesse Livermore mentions trading stocks as they approach 100, 200, or 300 was one of his favorite strategies as he could very often count on that large number acting as a magnet for buy orders — which then eventually results in further follow thru for several more points beyond the round number. “There is nothing new on Wall Street,” he’d say.
This is all on my mind as a household name and a darling of Wall Street and Main Street emerges from a nice bounce off its 50-day moving average and approaches 100… [Read more…]