What is it with these stocks? Looks like in the movies where they plug some guys heart to the heart monitor and it goes flat... Why do they gap up and die? I have found many stocks like these...
I think these are takeouts, the takeout price is announced and the price is pretty much dead until the deal is done.
Sorry, I'm not really sure what a takeout is. Tried to google it. Do you mean takeover? Where another company buys this company in question? Is there any way to profit from this?
What you see is called an "Island top" and its common when a stock gaps. On this chart eletronic arts traded sideways after the gap until the 27th of november until it turned downward. http://stockcharts.com/h-sc/ui?s=ERTS&p=D&yr=0&mn=4&dy=0&id=p40067086478 what you see on those charts also happens with low volume stocks, where someone bought a ton of stock..shot up 10+ points, then was dead in the water. avoid those kind. cm69
When you see that pattern, gotta think...they're being bought out. When the price kind of fizzles into pennies a day they've usually agreed to some form of merger/aquisition.
Definitely takeovers as Risktaker has stated. Cashmoney, notice those stocks move in cents; not like the $2 range in ERTS.
What happens when the deal is done? Does trading of the stock start again? Is the gap filled? etc. etc.
The stocks usually get delisted sooner or later in light of the buyout, unless the buyout offer falls apart due to a myriad of possible reasons.
Depends if its a merger or takeover,cash deal or stock swap and other fun things...Forget technical analysis in these type of situations... Leave these situations to risk arbs