【ZOZO】Decoding the stock price movement of the Yahoo-ZOZO acquisition with the former premium economics book 【The Market is Alive】

In a nutshell

1. Yahoo acquired ZOZO, and the market reacted with a positive surprise, causing the stock price to rise. However, the stock price showed strong movement on July 31, before the announcement.
2. According to 【The Market is Alive】, it can be seen that the early birds had already noticed and the stock price had jumped the gun based on the three consecutive bullish candlestick pattern.
3. Based on the three consecutive bullish candlestick pattern, it is predicted that after the slowpokes who joined late (for example, those who opened a securities account for the first time after hearing the news of the acquisition) have finished buying, the early birds will take their profits and the stock price will plummet.

Yahoo acquired ZOZO, and the market reacted with a positive surprise, causing the stock price to rise. However, the stock price showed strong movement before the announcement.

On September 12, 2019, Yahoo announced a tender offer bid (TOB) for ZOZO. This was a positive surprise for the market, and the stock price soared from the previous day's closing price of 2,166 yen to close at 2,457 yen.

A TOB is a tender offer bid, which means that a company announces that it will purchase the shares of a target company and purchases them from an unspecified number of shareholders without going through a financial instruments exchange such as the Tokyo Stock Exchange. It is basically used for acquisitions or mergers, and in this case, it was used for Yahoo's acquisition of ZOZO. The purchase price is usually disclosed. In this case, it was 2,620 yen.

However, strong buying was seen in the market before the official announcement on September 12. The red frame in the chart above shows that there was a large amount of buying with high trading volume on July 31, suggesting that institutional investors were accumulating shares.

Price movements that suggest insider trading may occur before an official announcement. Some people may have obtained advance information from some source, or there may be people who can predict the future from multiple pieces of public information. These people are commonly called "early birds." The stock price may have already priced in the positive news of the Yahoo-ZOZO acquisition.

According to the former premium book "The Market is Alive," it can be seen that the early birds had already noticed and the stock price had jumped the gun based on the three consecutive bullish candlestick pattern.

There is a well-known masterpiece in the market world called 【The Market is Alive】(Iwao Iwamoto/Transworld Japan).

The original book was written in 1957, and it is a collection of articles that the famous Japanese market player Iwao Iwamoto serialized in the Japan Textile News. This book is a reprint from 2007, and you can now buy it cheaply as a used book, but until it was reprinted, it was a well-known premium book that sometimes sold for over 100,000 yen. gonjitti owns this work and its sequel, 【The Market is Alive - Market Practice Edition-】.

This book mainly explains the psychology of market participants, political factors, and economic factors, but there was a sentence that could explain the stock price of ZOZO as a typical market movement, so I will introduce it. It is called the "three consecutive bullish candlestick pattern."

A bullish candlestick... refers to a candlestick on a stock chart where the closing price for the reference period is higher than the opening price. The opposite is called a bearish candlestick. In this case, a strong bullish candlestick was seen on July 31, and gonjitti was wondering what was going on, but the answer to the movement was revealed on September 12.

The chart above shows the cotton yarn market in 1953. It shows a potential bullish candlestick, a first bullish candlestick, a second bullish candlestick, a third bullish candlestick, and a phantom bullish candlestick. The three consecutive bullish candlestick pattern explains the participants who form this market in three patterns.

The formers of the potential bullish candlestick and the first bullish candlestick: "Early birds"

Early birds mainly refer to people who have secret information routes or connections to the political and financial worlds and who already know the news before it is officially announced. However, in addition to these cases, there are also investors who buy after detecting positive news from multiple official sources. In this case, it is thought that some investors were able to predict the acquisition scenario from the strong buying with high trading volume on July 31 and the official gazette information that Mr. Maezawa's stock collateral was decreasing.

The formers of the second bullish candlestick: "The cautious"

The cautious are investors who buy based on stock price movements, etc., although not as early as the early birds. This player includes institutional investors and some individual investors.

The formers of the third bullish candlestick and the phantom bullish candlestick: "The slowpokes"

The slowpokes are basically participants who start moving after the news is released, or who buy simply because the stock price is rising without doing much research. In this example, people who buy based on the news on September 12 and people who rushed to open a securities account are included in the slowpokes.

The phantom bullish candlestick, also known as the "buying climax" recently, refers to the fact that the buying of the slowpokes is starting to dry up and the selling of the early birds and the cautious who were aiming to take profits is getting stronger. When it comes to this point, it is a sign that the stock price will plummet.

Based on the three consecutive bullish candlestick pattern, it is predicted that after the slowpokes who joined late (for example, those who opened a securities account for the first time after hearing the news of the acquisition) have finished buying, the early birds will take their profits and the stock price will plummet.

Based on the above, gonjitti interprets the current ZOZO stock as the third bullish candlestick. I expect that the early birds will take their profits after a certain period of time. The buying of the slowpokes and the firm buying of the early birds aiming to raise the stock price will continue for a while, and then it will show a phantom bullish candlestick and plummet.

In addition to movements based on news like this time, the market moves due to a complex combination of factors, such as more micro market psychological movements and more macro political material movements. I would like to introduce "The Market is Alive" in another article.

This article is solely the personal opinion of gonjitti and does not recommend any specific stocks or financial products.

Aside (Recommended Book)

A recommended design book. It's packed with design tips that you can use forever. I use it often myself.