Trading idea: Just an observation on something I have noticed over time with bad news before the market opens....the smaller and less followed the company, the more likely that it will continue downward after the initial gap down...conversely, at least on a very short term basis, the larger and more widely followed the company, the more likely that it is to rebound, at least somewhat, after the initial gap down. My theory on this is that the more widely followed the company is, the more likely it is that there will be a portion of the total investor population that will not read the bad news as badly, will view it as only a short term blip, will think that they can make a quick buck on a small rebound, and will have the financial capacity to cause buys to make it rebound some...
Caveats...1) nothing, including this, is always true; 2) the kind of bad news is a variable that I have not factored into the general equation, but should always be factored into the real money decision; 3) the general condition of the market is a variable to factor into the equation; 3) it does not hold true all of the time, just enough of the time, that I see it as a indication of a potential trading opportunity....4) my general personal preference in this kind of situation is to short the smaller, less followed company rather than go long for the bounce in the larger, more followed company - my view is that there is less competition with big money on the small-short side than on the big-rebound side - but, the attitude of the overall market may keep me from doing anything or may sway me into playing the rebound.
Troy |
