weak sellers meet strong owners

I’m watching the capitulation, the running for the exits and the indiscriminate dumping of stock.

In the 3 business days, either side of the moment when Transocean’s BP operated rig sank (on April 22, 2010);

• BP’s stock saw 26% of its shares outstanding traded and stock fell 5% (stock fell 30% in the following 2 months as oil spewed and congressional hearings continued)
• Transocean (owner of the rig) saw twice its shares on issue traded and its stock fell 9% from $92 to $84. From late April to late July 2010, 300% of its total shares changed hands. During this 2 month period, it’s share price halved and its market capitalisation was reduced by $12 billion.

Irrespective of a company’s market capitalisation, there should be merit in monitoring the amount of shares turned over in a security, especially when its price is declining.

Providing that a company’s prospects hasn’t materially changed nor its business has become impaired as a result of recent news, this is often when stock changes from weak owners over to strong owners.