During stage 4, earnings models are generally revised downward, which puts more selling pressure on the stock. The stage 4 selling may continue for an extended period until it’s finally exhausted, and the stock enters another period of neglect. As a stock languishes, it’s back to stage 1. It may take a while for the company to get back on the growth track and return to strong earnings, or the company may remain in stage 1 for many years. In some cases the company may go bankrupt. Stage 4 is essentially the opposite of stage 2 in terms of price and volume characteristics, with higher volume on
...more
