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This came as a bit of a bombshell for investors who hadn't been anywhere near expecting such a sharp move to the downside, but it indicates just how nervous businesses were throughout the fiscal cliff negotiations that went down to the wire.
Angus Campbell, head of market analysis at Capital Spreads, said: A seesaw session today as buyers and sellers couldn't make up their minds as to whether the recent strength we've seen so far in 2013 has any more legs in it or that, bearing in mind the troubled waters that lie ahead, there's potential for a more comprehensive move to the downside.
Angus Campbell, head of market analysis at Capital Spreads, said: After a terrible start to the week, where it looked like we could be in for a more prolonged move to the downside following dire manufacturing data from across the globe and the prospects of a new anti-European president of France, slowly but surely we've clawed back those losses to almost end the week in positive territory.
Bear Trap: A false move to the downside that does not start a new downtrend.
The next day, the stock made a move to the downside.
This was done via a 1,500-lot 1,500-lotspread in the January contract between strikes 20 and 25, which the trader put on for a $1.25 debit that requires at longt a 17% move to the downside to break even by mid-January.
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Instead, aim to avoid the large crashes — those 25 percent-plus moves to the downside.
The shares have performed well recently, but we think the risk to forecasts has now moved to the downside.
So far, US earnings have by no means been a disaster, growth figures and indicators have been a little disappointing, but for these things to warrant a whole week of moves to the downside seems unfair.
The lack of a bigger and broader sell off is a testament to the strength of the stock markets which in the past few weeks have suffered sharp moves to the downside, but have always been quick to regain the lost ground.
"In the U.S. we have at least three rate hikes this year, but in the euro zone, there was some exaggeration about where inflation was heading so that is now being priced out and yields are moving to the downside," said DZ Bank strategist Daniel Lenz.
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