Saul Stocks that have gapped up.

I do not base major decisions on technicals but at the same time I do believe that when stocks gap up dramatically that they very often need to/tend to retreat back towards the 50 DMA line before trending back up. I guess there are many stocks and 3 of Sauls stocks that have gapped up dramatically (SBNY, ANET, SNCR). While I know that no one can know the answer I am wondering if it might be worthwhile taking some profits on these three and redeploying to stocks that are lagging vs just letting them ride.
If I did sell it would not be to wait for them to come down to the 50 DMA as firstly they might not come back down and secondly selling only to rebuy might not make sense as the tax bite on a short term sale would probably make it all a wash.

I guess the question in part is why did they gap up. If it was because they were being held down by an uncertain election outcome they might not come down. If it was because of irrational exuberance that will be followed by new uncertainties of a trump presidency and its effects on the economy then they will come down and possibly big time or bigly (sorry couldn’t resist :slight_smile: ).

Any thoughts - Thanks and Happy TG to all and thanks to all for an amazing board.

While I know that no one can know the answer I am wondering if it might be worthwhile taking some profits on these three and redeploying to stocks that are lagging vs just letting them ride.

I know it works for me but three caveats:

  • As a non-resident alien investor I don’t pay capital gains taxes

  • It works best with flat lining stocks, does not work with falling stocks, and is more difficult with rising stocks. You have to get to know each stock’s trading behavior

  • It takes a lot of patience. You set entry and exit points and patiently wait for them to happen.

For example, buy two shares of AMZN at $700 ($1,400). Sell one at $750 (-$750). Net cost basis of remaining share: $650. If the dips don’t show up you make less than buy and hold but your risk is also lower. No free lunch.

Denny Schlesinger

1 Like

3 of Sauls stocks that have gapped up dramatically (SBNY, ANET, SNCR).

Hi Craig,
SBNY gapped up on hopes based on the new administration. I thought it was a little exuberant and trimmed my position slightly.

Arista was up on significant news. Their work-arounds for the Cisco patents passed and were approved for import. That’s big news.

Synchronoss shot up on their earnings results and conference call, which showed a fundamental change in the company has successfully been implemented. I added to my position.

You can’t treat all rises the same but have to try to evaluate what they’re all about. Some may be very warranted. Just like you can’t buy into all stock drops. Some may be very warranted too.

Happy Thanksgiving.

Saul

5 Likes