This morning, Gold Finder announced some drill result from its Golden Rose property. Although the core samples from two drill holes contained no significant gold values, two others had quite good results. The flagship result from one hole was 5.1 metres of drill-core rock sample containing an average of 15.62 grams of gold. That's quite a high value over a decent interval.
The stock shook off its doldrum as a result. The announcement was sent out seventeen minutes before the market opened. As is the case for other hot stocks, Gold Finders leapt up at the open because of a clog of market orders put in between the news-release time and the start of trading. It opened at 80 cents. Some others piled in right after the open, attracted by the response to the news. By 10 minutes after market open, the stock was up to 85 cents. Ten minutes afterwards, it peaked at 94 cents. It then sunk, undulating down to 73 cents as of 2:00 PM. This one's another example of why it's unwise to barrel into a stock on good news.
Unlike some of the other stocks profiled here, Gold Finder shot up on relatively low volume. As of 2:00, only 170,000 shares have traded. Had its news been a market-shaker, the stock would have traded in the millions of shares. As it is, not very many people are watching it.
Despite that relative obscurity, it's moved an awful lot today. This kind of stock is known as "hard to buy" because a large market order could send it spiraling up (and back down again afterwards.)
Just below is its one-year chart, from Stockwatch.com. The current spurt-up doesn't look like much compared to its ride last spring:
The Moral Of The Story: Actually, there's two.
First of all: when buying a thinly-traded stock, a market buy order can be dangerous unless you have a lowest ask that's big enough to fill your entire order. Thinly-traded stocks don't always have asks that are right above the lowest; in some cases, the next ask can be well above - two, three or five cents above, making a market order much more expensive than it looks. This cautionary point applies especially to large orders. In cases like this, it's helpful to enter a limit order at the ask price. That way, you can wait for someone else to dump new stock on it instead of chasing stock that might be far more expensive.
Secondly: there's no real predictability to the market's response to a piece of good news. Some stocks already price it in. Some aren't that widely followed. Some just yawn. Sometimes, a supposedly hot piece of news - like a property acquisition - has a hidden downside that only people following the company for a long time know of. (An example would be a prior record of hastily acquiring hot-area properties which don't pan out.) Trading is a talent, and only a few are good at it. For the rest of us, the only way to play the game is to play the waiting game. Once you've done the due diligence and satisfied yourself that you've got a keeper, wait it out...and don't get distracted by exciting headlines from other companies in the interim.
(Some people will try flip-trading anyway. If you do, I suggest giving up if you can't wring a profit out of the first two flip-trades you make. Two losses should be enough.)
Disclosure: None.
No comments:
Post a Comment