It's not just price and volume, it's price, patter

It's not just price and volume, it's price, pattern, and time. In my posting yesterday I showed a side by side comparison of TECO and ECCI both exhibiting a higher low, MACD cross over, and a MACD uptrend, right before a few closes above key moving averages. With TECO, the price remains at the lower end of the trading range going into earnings, which means on face value that the market has already priced in bad news. In other words the bar has been set pretty low for revenue and it should not take much to satisfy the market.

Put yourself in the shoes of an institutional investor. DTL Energy Holdings has 50 million bucks and invests in small/medium sized exploration plays both on a JV and equity basis. You have a portfolio of 15 companies, and a watchlist of 100 companies. Whenever you make an initial allocation it is sized at half a percent of your assets under management and you scale in from there.

You had your analyst do valuation work on your 25 favorite watchlist companies, and you have TECO pegged at let's say 10 cents a share at this point. The earnings data comes out tomorrow and from what you see in the data it confirms your valuation and actually adds another 2.5 cents worth of valuation. You look at the stock price and say gee, this thing is at a 70% discount to my valuation, it's beaten down into a 200 week moving average, the earnings did not knock my socks off but the stock is so damn cheap that I'm mitigating my risk.

So, you get on the phone with a trader and you instruct them to buy out everything under a nickel and then do what he has to do to fill the rest of the order. He turns around and buys out everything under a nickel, so it creates momentum and he has to either wait and/or play some tape manipulation games to fill the rest of the order over the next couple of weeks.