We’ve had some panicky days in the stock market in the last six months. Panic is contagious and when you see that ticker going down day after day, its easy to get caught up in all the negativity. It is understandable that you might decide to sell a stock or two but one thing you should try to avoid is selling first thing in the morning.
Evenings are when a lot of people come home, read or watch the news, look at their portfolios, and make decisions to sell. They often don’t have time to make such decisions at work or have time to execute the trade. That is why they do it in the evenings when the markets are closed. The overnight hours often see the sell orders pile up, especially in times of high market volatility and that will drive stock prices even lower in those first minutes of trading.
If you must input a trade while the market is closed, you might think of putting in a limit order. That way you will never find out later that your stock did sell like you wanted but at an alarmingly low price because of so many sell orders caused by panic in the opening minutes of the market being open.
The best example of this we have seen in a long while was August 24, 2015 when the Dow dropped a breathtaking 1100 points within five minutes of opening. Called a “flash crash” it was a real life example of how panic can get out of control and anyone who sold in that fist 30 minutes Monday morning lost more than they needed to as the market rebounded throughout the day to “only” lose about 500 points.
I used to sell right at the open just like I described above but don’t do it anymore, choosing instead to wait a while to see how things go in the opening hour. That way my sell orders don’t get caught up in any silly selling frenzy and cost me more money than need be.
Don’t Sell Your Stocks First Thing In The Morning!
Fitbit: Great Earnings + Bad Future Guidance = Stock Down 21%
Beginner stock investors often don't understand why a stock can go down after a company announces great earnings. It happens all the time and it has been happening a lot during this just completed earnings season.
For instance, Apple reported the best quarter in the HISTORY OF CAPITALISM last month and the stock went down! How can that be?
The reason is that investors care more about the future and less about the present and the past. A great example of this is Fitbit (FIT), the maker of wearable fitness devices and a new smartwatch called "Blaze". Fitbit has, by all accounts had a great Christmas quarter: its earnings beat analysts estimate by 45% and its revenue was up more than 92% from the year before. With numbers like that, you would think that the stock would jump up nicely in price the next day.
But in the end, investors only care about the future and on that front Fitbit might have a bit of a problem. Fitbit's guidance was substantially lower than those same analysts had projected and that alone caused the big 21% selloff. You see, who wants to buy into a company that might be slowing down or is projected to do worse than you had hoped? THAT is why the guidance numbers companies give during their earnings call are often more important than the actual numbers from the just completed quarter.
Fitbit is a good company with a some good products but the important question is whether fitness bands with limited functionality have staying power. The company makes a great fitness band but if you need more, is the Blaze enough to lure customers who might just decide to buy an Apple Watch or a Samsung Gear that can do a lot more? Maybe not and that is the concern of investors, especially since the Blaze looks like a cheap imitation of the Apple Watch.
