Ex-Dividend Gaps

Alchemist · #1 23rd September 2009, 03:26 AM

I deleted a post by mistake.

Someone had asked me about ex-dividend gaps.

Such ex-dividend gaps should be neglected.

I will quote from Edwards and Magee's "Technical Analysis of Stock Trends"

Quote:

First, however, we must eliminate from consideration the gaps that do not mean anything........

Finally, gaps that appear on the charts when a stock goes ex-dividend (whether the dividend be in cash, stock, rights, or warrants) possess no trend implications. They are occasioned not by a change in the Supply–Demand relation which governs the trend, but by a sudden and irreversible alteration in the actual book value of the issue......

Eliminating the technically meaningless type named above......

vasa1 · #2 23rd September 2009, 06:59 AM

That deleted post was mine.

It had a link to www.outlookprofit.com, a "trading" offshoot of Outlook Profit magazine.

Towards the end of the page, in Chart Patterns, they discussed Shipping Corporation of India (SCI) and said that it has formed a bearish island reversal pattern. They also suggested going short with a target of Rs. 133 and stop-loss of Rs. 146. However, this coincided with the stock going ex-dividend, hence my post.

vasa1 · #3 5th December 2009, 06:12 PM

Alchemist, how can we tell if this is done by BSE/NSE as well?

Quote:

For those purchasing shares after the ex-dividend date, they no longer have a claim to the dividend, so the exchange adjusts the price downward to reflect this fact.

Source

Alchemist · #4 5th December 2009, 07:09 PM

Quote:

Originally Posted by vasa1

Alchemist, how can we tell if this is done by BSE/NSE as well?

Source

It is not done on Indian exchanges and it is not needed.

the adjustment is needed on exchanges where orders are carried over to next day.

in India, all orders are canceled at the end of the day.