Did you buy Facebook (FB) after hours? I did. And I sold it too. Here are my thoughts on dealing with big after hours moves. We’ll definitely be looking at this tomorrow morning. (July 25, 2018)
FB
I want to talk Facebook ( NASDAQ: FB ) and here’s why: The stock was really on a tear up until they reported earnings. Now you have to look really closely to find the price, Boom! it’s clear down here at $180.00. You can see, we don’t even care what their numbers were, they stunk; otherwise the stock wouldn’t be down over 15 percent. Probably when it is all said and done this thing will fall more than 20 percent.
Now, just one thing, I typically don’t do this, I don’t like to trade in after hours trading. Sometimes I will do it in the morning before the opening bell because I am sitting there, I see what is happening with a stock and at least I can watch the stinking thing. But if I am taking a position after the CLOSE (I’m kind of a worry-wart here), then I have got to sit around and be wondering all-night long what is going to happen the next morning, looking at my iPhone in the middle of the night; it is just really stupid so I don’t do that.
What I did do here after hours was, I bought some Facebook ( NASDAQ: FB ) stock at $200.60, something like that. So I go about my business and I am doing my Strategy Session research and things like that. I am watching Facebook ( NASDAQ: FB ) and it is doing this and I don’t care what the conference says or any of that stuff because those guys lie all the time anyway, we know this, but I am watching the price. The market had all this time to digest what’s happening and then you will see other things coming out and I am sure CNBC was yipping about it and all that.
The stock is kind of tightening up here, right? This is all good stuff. It gets above 202.00; I am feeling pretty good about things. And then it is down around 200.00 and I am thinking, okay, here comes the buyers; and then they are not coming in here. So by the time it got to 198.00, I’m out of here. This is why you don’t really trade after hours; the volume is relatively low, here, 330 thousand shares traded in a 5-minute bar. Well, it is a heck of a lot more than that that is going to be traded during the active time in the market.
Just as a function of risk management you have got to be selling if the stock falls below where you think it is going to go. I didn’t have a set stop, like 3 percent or 8 percent or something. I just bought the stock because I thought that the stock was going to hold around 200.00, maybe a little bit below that. Generally speaking 200.00 is a key level to buy, particularly when you are looking at where the 50-day moving average is, a little bit below that; I am thinking this is a pretty good deal. Once the stock started rolling over I am out of there. My thought process was, you know what? If the stock is up tomorrow morning then I will just buy it back and take the snapback. What I did NOT anticipate was this: I didn’t anticipate the stock falling like it is here.
So what is the lesson? The lesson is this: If a stock is not doing what you think it is going to do then you ditch that witch. You get rid of it right away you can always go back in. This is not selling here or selling here or wherever it was. This is not a function of predicting that the stock is going to fall a long way, into the 170.00s. This is a function of the stock NOT doing what I thought it was going to do, which is continue to move up this way.
So I got out and what I am not doing now is, I am not in this stock hoping that it will turn around, I am talking to you, you are holding the stock, you are thinking it is going to turn around and then it doesn’t turn around. Now you are looking at it and you are thinking, I should have sold it at 200.00 or 199.00 or 198.00 when I just had a small loss. Well I CAN’T sell it now at 182.00 because it is going to reverse and I am going to wind up booking a big loss so I am just going to hang on to it until it turns around. And so all this time you are still hanging on to it, waiting for it to turn around. Ultimately, this will turn around. But do you really know whether it is going to turn around at 173.00 or 163.00 or 153.00?
If we look at this on the daily chart, this is now WELL below the 200-day moving average, well below the 200-day moving average. So this is a stock that is actually getting crushed. Now tomorrow this could wind up being a really, really good snapback. I would expect at some point the stock will come up and test this 200-day moving average. But with that said, I’m not looking at buying it right now. Even though, by the time you are looking at this video, at 175.00, Dan could seem like a real genius if he said, “Yes, I am buying it right here.” But I am not because I am thinking about my risk; heck, I bought it up here at $200.60. If I had still been holding that trade, this would have been one of the worst trades I’ve had in quite some time because it is down this much.
What I am saying is, in the after hours, if the stock is not doing what you think it is going to do, exactly when you think it is going to do it, you need to get out, regroup and look for it the next day.
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