I am in GMCR and now down in the after-hours about 8 to10% from my buy point given the breaking news on the SEC accounting inquiry.

Published : September 28 2010 at 18:52 ET

Q: I am in GMCR and now down in the after-hours about 8 to10% from my buy point given the breaking news on the SEC accounting inquiry. My first question is do I sell immediately in the after-hours or wait to see the price action in the morning? Does the fact there is an SEC inquiry suggest for future reference that one get out as soon as one hears the news -- in case this happens again? Any reason to stay in here given the reason for the drop and/or that the stock is a momentum stock?


A: If you bought on yesterday's pocket pivot, which it sounds like you did, then your position should not be that big since you were buying on a continuation pocket pivot which we generally don't use as an initial entry point unless we wish to play "aggressively," which means with the understanding that risk and reward go hand in hand.

That said, we use a 7-8% maximum stop loss on any position, no questions asked. If you are asking if we have a crystal ball that tells us whether it will bounce from here by tomorrow's opening or shortly thereafter, we have to admit that we do not have such a crystal ball, but we wish we did! The company states that the accounting error is "immaterial" to earnings, and if it opens up at current after-hours levels, then it will be right on top of the handle from which it broke out of a cup-with-handle base on September 8th. A bounce would be "logical," but not guaranteed.

This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.