Reading Is Fundamental
What is your first plan of attack when a stock gaps on a news event? Is your
first reaction to buy or sell? The truth is, neither is wrong, but you have to
read the market before you take the plunge.
09:38:49
Safeco (SAFC)
has gapped higher on the open, following a sizeable earnings surprise. SAFC
is currently up 1.91 at 37.88, however the first volume bar on the intraday
chart is a large range one showing declining price winning the battle in the
first five minutes of Monday’s session. The stock is appearing vulnerable to
bleed back into the gap to the downside if it breaks down from its current
consolidation.
SAFC starts to break down as the indices do, confirming the
initial volume bar down. It then proceeds to drop nearly 2 points — so much for
the good news!
This is not to say that news is irrelevant, but just that you
need to look at the whole picture. See how the stock reacts to the news, then
form your plan of attack.
Until tomorrow,