Irrational stock movement- I hold to my thesis
That is, if a stock has a good earnings report, and strong guidance, yet the stock doesn't go up past earnings day opening prices within 7-8 weeks, it's a sell. This is especially true if the stock price has also gone below the 60% fibonaci retracement of recent gains as well. CAI & TRTN both fall into that category, as both are below earnings day prices now by a long stretch. Now for a few days there, I thought they were going to come back roaring, but when the markets lost their gains back on Wednesday last week, they both gave back close to 10% real fast ! Thing is, when the market went up even more on Thursday than it gave back on Wednesday, they both still went down further ! This is ominous stock action for sure.
Now lets look at a couple other stocks that have acted irrational despite good guidance. Nutrisystems(NTRI) has had good earnings and guidance all year long, yet the stock has been trending down for several months. It was a sell 7 weeks after the first qtr it had strong guidance, and didn't get back to earnings day opening prices. If it had been sold then(assuming one was stubborn and is still holding), one would have saved around 20%, and several months of time tying up funds ! Same was true for NAII last year at $13-$14, where I sold, or PCMI several months ago at $19 where I sold, or CAI at $33 a month or two ago where I sold.
I believe my % gains(on my stock portfolio) has really picked up for incorporating this rule a couple years ago.
In highly cyclical sectors(where there's already been a multi month or longer huge run), I have gotten to the point where I might sell if a stock don't rally past earnings day opening prices(assuming strong guidance) within a week. ESIO was a good example as of late, however the jury is still out on that one, as I may have pulled the sell trigger a bit too early. MU was a good recent example as well when I sold in the $43 area after the stock went to $46 on earnings day, but backed off & didn't re rally for weeks despite super strong guidance.
