Accumulation Area

  

The stock had been trading for $100 for months, then bad things happened to Rectangles R Us. It fell to $82, sat there three weeks, and then hovered at $65/share, where it traded at only a dozen turns times earnings. At this level, it magically seemed like the stock could go no lower, despite continued bad news flowing from Rectangle, which was being assaulted by Soft Corners. This $65 is the accumulation area at which buyside analysists and portfolio managers decided, either on a fundamental and/or technical basis, that this was the price at which to buy the stock and hold it, because eventually, from $65 as a base cost, the belief was that investors would see a very nice return from here.

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