Thursday, June 9, 2011

Stock Life Cycles - More

Is it possible for share prices to go higher while the stock life cycle goes through its three stages. This question is asked here:
On the Accumulation Realization Distribution theory on the NIFTY, I have a couple of questions:

1. Should the distribution bring back the level to old Accumulation levels? Would it not be possible for the base itself is moved up higher because of accretion in value?

2. What if the the given period too is part of accumulation phase spreading over a span of 2/3 years? This would mean that another realization phase is waiting to happen.


Sudarshan (Namesake)


My Notes:

Hello. First of all, you have a very nice name!

When a stock is in a long term bull market, it does go through the stock life cycle, but each accumulation levels keeps on moving up. It is not neccessary that the process of distribution should bring prices back to the original accumulation level. I am giving a chart which shows this clearly:

2. Markets move in different cycles, at the same time. It is possible for lower time cycles to complete many rounds of the life cycle while on a higher time frame (larger cycle) the process may appear as accumulation. Therefore, the answer to your second point is: yes.


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