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Can you tell if a stock is about to rebound?

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Author's Note: Can you tell if a stock is about to rebound?

In its purest and somewhat sentimental form, an investment in the stock market is a vote of confidence for the future performance of a company or industry. If I buy shares of stock in General Motors, it means that I believe that GM will continue to innovate and outsell the competition. When the Dow Jones goes up, we generally equate that with growing confidence in the American economy. But how much does stock price and investment trends have to do with the actual financial performance of American businesses? And how much can be attributed to sophisticated traders using any number of mathematical algorithms and inscrutable techniques to "game" the system? If you want to take a somewhat disturbing look at the reality of modern stock trading, look up information about high-frequency trading or "robo-trading," which accounts for at least half of all the daily trading volume on the New York Stock Exchange.

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Sources

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  • Cramer, Jim. "Cramer on Spotting a Stock's Bottom." CNBC. Feb. 14, 2013 (April 26, 2013) http://video.cnbc.com/gallery/?video=3000147989
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