How should you respond to market rumors?

It is quite often that ACCICB and I have the same stock in our books. Recently one of them was subjected to a takeover rumour which caused the price to skyrocket once market opened. As the news broke after market closed, I placed an order to sell my lot before market opened the next day and boy did it open strong!

I was chided by ACCICB as to why I made such a rushed decision aka I should wait and see whether rumor is true or at least later so that maybe prices will go much higher etc. This was a stock that I held for slightly more than a month as I couldn't exit earlier as it fell slightly short of my exit price. Yes I simply ignored the indicators although back then it was primed to sell and pocket a small profit. 

It was a company I was comfortable with, good dividend payer, well liked and covered by analysts, solid business model etc so I was in no hurry to exit except at my target. My philosophy was simple. The rumor was unconfirmed and has a 50% probability of being true and 50% probability of being fake...perhaps a manipulation by a trader/ hedgie or someone who has a vested interest in making the stock price fly to the moon. As a small fish in the ocean, I can't make waves but can only ride the waves and hey if I see food, I'll eat it up and be happy! 

The opening price had exceeded my expectations and seeing how choppy the price was for the past month, I thank the person who released this yummy tidbit to the media! ACCICB held on to the stock for a couple more days and sold it based on the indicators at a slightly lower price than mine. The high over the past few days was a couple more dollars than what I sold so I was happy since I didn't have to look at it or think about it and have more time for the rest of the stocks in my books.

I could have easily just sold a portion of my holdings and hold on to the rest which I think is what an investor would have done. Given the loan I was holding which to me is like a ticking clock and since I do have my doubts on the reliability of this rumour, I chose to exit in full. If the price becomes attractive again, I may pick up some shares later on. 

Post market rumour days have seen the stock price falling but not diving so I guess people are still hoping. It's early days yet so we shall see. 

Comments

  1. LOL!

    Joyce,

    This is typical of men.

    Chided you for selling early, and then sold at a slightly lower price than you!?

    That's why I only poke on ideas and opinions.

    I stay the hell clear of advising how others should conduct their trades when I myself is busy sharpening my saw.

    ReplyDelete
    Replies
    1. Yeah which is why I always do first then tell later! ;P

      Delete

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