Is it wise?

[prometeo1984]

Hi all

I was wondering..is it wise to buy a share after it dropped a lot due to some unexpected news? or sell after the share price increased dramatically in one day?

Say a stock goes up 50% in one day, its likely that many ppl will sell and price will go down, right?

Thanks for any comments!

 

[Patrik]

Hi! Maybe or maybe not. It´s a game like Poker. Those who win will take the others money. I think it´s better to stay with the trend and buy/sell retraces or breakouts in it WITH stops. But trends will also end of course. As for 50% it´s an important level in itself it seems but anything can happen.

 

[damianoakley]

Hi all

I was wondering..is it wise to buy a share after it dropped a lot due to some unexpected news? or sell after the share price increased dramatically in one day?

Say a stock goes up 50% in one day, its likely that many ppl will sell and price will go down, right?

Thanks for any comments!

I would say that's a 50/50....

There are plenty of examples of the market falling significantly in a day, and then reversing, but then there are just as many examples of the market falling significantly and continuing to plummet.

I think you would need to factor in a number of other things and assess each situation on its own merit.


Thanks

Damian

 

[timsk]

Hi all
I was wondering..is it wise to buy a share after it dropped a lot due to some unexpected news? or sell after the share price increased dramatically in one day?

Hi prometeo1984,
I don't think there's a simple all encompassing answer to this. Buying a share that's dropped may be part of a winning contrarian strategy for some investors/traders. However, the key phrase in your question is 'due to some unexpected news'. This makes a big difference and, as a rule of thumb, I would say that if the story changes significantly - then tread very, very carefully. A good example of this is with the U.K. stock Carter & Carter (CART). A friend of mine (and very good trader) was very interested in this stock and when the CEO died tragically in a helicopter crash, the price plummeted. (Red arrow on attached chart). At that time, they were a good company doing a good job with good sales and profits. In theory, the loss of the CEO shouldn't affect the fundamental story about a company. After all, his untimely death isn't going to prevent the company from fulfilling its current obligations or continuing to move forward in the way that it might do if, say, the CEO suddenly resigns following allegations of fraud for example. And yet, without the strong leadership of its inspirational CEO, Carter & Carter floundered - big time. So, if the story changes - for whatever reason, the lesson is to be very much on your guard (if you're already in a position) and open to a possible trading opportunity if you're not.
Tim.

 

[timsk]

. . . And yet, without the strong leadership of its inspirational CEO, Carter & Carter floundered - big time. So, if the story changes - for whatever reason, the lesson is to be very much on your guard (if you're already in a position) and open to a possible trading opportunity if you're not.

Just when it looked as if the situation couldn't get any worse. . .

Understatement of the year: the market can be cruelly insensitive and ruthless at times. One can't help but feel sorry for the family of Philip Carter, the staff and the few shareholders that remain.
Tim.

 

[searchlight]

Hi all

I was wondering..is it wise to buy a share after it dropped a lot due to some unexpected news? or sell after the share price increased dramatically in one day?

Say a stock goes up 50% in one day, its likely that many ppl will sell and price will go down, right?

Thanks for any comments!

I was thinking on the similar lines; not a shares but indices(i.e ftse 100, Dow), instead of unexpected news , unexpected events(i.e terrorist atrocities).
It seems to me that initially big sell of is taking place then in the relatively short space
of time market recover all the losses to the previous level and normal rules(whatever they are)apply.In between no fundamentals, no charts, just one think. Price will come back to the pre-event level. Or is it to simplistic?

regards,

 

[Charlton]

The function of "unexpected" news

I was thinking on the similar lines; not a shares but indices(i.e ftse 100, Dow), instead of unexpected news , unexpected events(i.e terrorist atrocities).
It seems to me that initially big sell of is taking place then in the relatively short space
of time market recover all the losses to the previous level and normal rules(whatever they are)apply.In between no fundamentals, no charts, just one think. Price will come back to the pre-event level. Or is it to simplistic?

regards,

News can be a wonderful cover for the true activities of the big players. Ask yourself who is doing all the buying during this period and what is the purpose. and conversely who is doing the selling.

Charlton

 

[TheBramble]

News can be a wonderful cover for the true activities of the big players. Ask yourself who is doing all the buying during this period and what is the purpose. and conversely who is doing the selling.

Charlton

Yes. Rather than feeling sorry for anyone, the clues were all there, albeit not very usefully scaled in the chart posted, for all to see while the stock was still hovering at the 10 mark. Professional involvement is quite clear throughout the final few bars, but it would be incorrect to suggest there was a high level of professional interest in this particular stock.

A bargain is only a bargain when, and if, you get to sell it on.