There is a stock statistic that states once a stock goes below $10 for
the first time in its price history (not adjusted for stock splits)
the stock as an X% chance to go to $5 before it goes back to $10.  I
am looking for the exact statistic.

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Clarification of Question by jami3-ga on 02 May 2006 13:08 PDT

Thank you for at least commenting, I was rather disappointed that no
one had so much as commented.

I am very aware of a companies market capitalization relative to their
price and shares outstanding.  However, there are all kinds of
correlations that happen in the stock market that people are unaware
of or ignore.  This is not an arbitrary statistic that has no value. 
An arbitrary statistic that has no value would be something to the
effect of 10% of all stocks trade between $20 - $30.  No one could
profit from something like this as it just states the way things are. 
My statistic has very much value.  If you knew that a stock had a 75%
chance to go from $10 to $5 before it went back to $10 the first time
it went under $10, the statistic would have an enormous amount of
value.  So, Ubiquity, while you are correct about market
capitalization, your comment is totally incorrect as it relates to my 
question.

Vercingatorix, you have a little more insight into my question
although you seem to dismiss it's significance.  If any one else has
any comments, I would be happy to hear them.  I would be very happy if
a researcher would attempt to field this one for me, or at least tell
me what I need to do to make my question more tempting for a
researcher to tackle.

Cheers

Sounds like ana rbitrary statistic that has no value.  Sicne a stock
price of $10 is of no signifiance.

You can have the same company with 50 shares outstanding at $100 or
with 1000 shares outstanding for $5.  The company is the same and any
investment of a given sum is the same.  Tjhere fore any stat you end
up finding is worthless.

While what ubiquity said is quite technically correct, I don't think
it's totally accurate. There is a stigma about companies with
single-digit stock prices. I've worked with enough investors to know
that a lot of people just don't look at stocks trading below $10. Even
more intriguing is the fact that many investors consider all
low-priced stocks speculative regardless of their market value or
business prospects, and as such will buy and sell quickly, take
profits, and bail out as soon as there is the slightest hint of bad
news. That makes for volatility and could potentially hold stocks in
trading range.

Investor sentiment is one of many factors that figures into stock
pricing. Stocks that fall below $10 are often sluggish in their return
to former price levels. I know that's true, but to be honest, I've
never given the reason more than a moment's thought before.

As for the statistic the questioner seeks, I don't know it. I, too,
think it has little significant except to technical traders, and I'm
not a technical trader. But a shrewd technical trader may be able to
devise a strategy that takes advantage of investor sentiment to profit
from these low-priced stocks. I'll leave such research to those less
conservative than I.

V

I disagree with ubiquity -- I would say that 90% of investors are more
familiar with a stock's price than its market cap.  I see "irrational"
price sensitivity in the markets on every level, even on the intraday.
 Round numbers like $10, $25, $50 carry psychological significance as
do equivalent price levels like .25, .50, .75.  I would also venture
to guess that more breakouts fail at round numbers than they do
otherwise.

A trader that I used to work with made good money jumping on stocks
that pushed above $20 for the first time.

Anyway, I have heard of this <$10 statistic as well, I just can't
verify it.  You might want to find access to a data set so you can
backtest this strategy yourself.  I saw some free data somewhere on
the net recently, I just can't remember where since my brain is fried
at the moment.  Good luck.