Re:What Is a Gamma Squeeze in the Context of Stock Trading?
by refulgentis on Monday January 11, 2021 @08:21PM
(#25741024)
There's concrete predictions laced in there, in the vocabulary of TA, or technical analysis. The self-aware who practice this call it 'horoscopes with funny lines', the premise is drawing trend lines based on different sets of historical data, using that to draw a conclusion about pricing over some time period X, then noting the consequences of the trend line shifting up or down.
So, they're predicting both sides of movement because they're interested in the slope of the trendline dividing those sides and the time-frames they're analyzing, not the sides themselves.
One example that clarified it for me is a purely degenerate case, the stock went from 1 to 0 over all possible timeframes. In that case, all trendlines are purely vertical, all trendlines are the same for all timeframes, so the fact it can only move up is obvious, and contrasting trendliness is uninteresting.
However, in other cases, (say, a small medical research company that has been on the market for a decade but recently produced the singular vaccine for a massive pandemic, but has an expensive and novel manufacturing process that makes it 5x the cost of competitors possible solutions), contrasting trendlines for the last two months versus last decade is very informative for comparing the case in which the vaccine market becomes competitive, versus the monopoly it "is" today.
Noting the signal we'll receive about the 'class' of price movement, based on both directions the price could move, is very helpful and necessary for judging the TA after the time period plays out.
So, they're predicting both sides of movement because they're interested in the slope of the trendline dividing those sides and the time-frames they're analyzing, not the sides themselves.
One example that clarified it for me is a purely degenerate case, the stock went from 1 to 0 over all possible timeframes. In that case, all trendlines are purely vertical, all trendlines are the same for all timeframes, so the fact it can only move up is obvious, and contrasting trendliness is uninteresting.
However, in other cases, (say, a small medical research company that has been on the market for a decade but recently produced the singular vaccine for a massive pandemic, but has an expensive and novel manufacturing process that makes it 5x the cost of competitors possible solutions), contrasting trendlines for the last two months versus last decade is very informative for comparing the case in which the vaccine market becomes competitive, versus the monopoly it "is" today.
Noting the signal we'll receive about the 'class' of price movement, based on both directions the price could move, is very helpful and necessary for judging the TA after the time period plays out.