Opening Drives Set The Mood For Stocks

With Earning seasons in full effect, over the next few weeks, there will be a lot of “in-play” stocks. In-play stocks are those with fresh news or earnings announcements (“catalysts”). Why do I trade Stocks In-play? Well, read @Stop_Hunter‘s and @Smbcapital‘s blog posts right here and here (respectively) to understand why.

One important thing to know about in-play stocks are that a majority of them have opening drives. Why are opening drives so crucial? Because usually they set the mood for the stock for the rest of the day. For example, if stock $XYZ has a big down move on the open, it is likely to continue down (or at least stay down) for the rest of the day. Now obviously there are more things that have to be taking into account, like the conference call and initial reaction (when a strong stock gaps up really big for instance, it might sell off some initially, but might find support sooner than a weak one).

Today, there was 2 very good examples of the opening drive for the in-play stocks. Halliburton ($HAL) was gapping down just slightly, but then immediately sold off. This set the mood for the rest of the day, it was going to stay weak. If you had tried any longs in there, you would have AT BEST sold for scratches. On the flip side, the same holds true when a stock has a opening drive up, like Hasbro ($HAS) did today. If you had tried shorting this stock today, you most likely at best made a few pennies (if you got lucky). Now, would you have made money shorting Halliburton or going long Hasbro after the opening drives. Likely not. But most of the time, there will be a second leg up, and your going to want to be in it.

Now, there are other factors that must be known as well. One is the reversal. Stocks can reverse intra-day which can change the mood for the stock. Another thing is that some stocks have choppy openings (like Citigroup did today), which typically lead to choppy intraday trends.

The Charts

$HAL – Halliburton 5 minute chart

















$HAS – Hasbro 5 minute chart


















$C – Citigroup 5 minute chart

















Tags: $HAL, $HAS, $C, $STUDY

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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