PPR - RWLK - Another Good Lesson

Published : November 13 2014 at 16:10 ET

Here's another good lesson in handling stocks that sell off after a buy is made.

Bioinformatics company RWLK that develops exoskeletons for the treatment of wheelchair bound individuals had a buyable gap up after a strong earnings report. The gap up nearly closed minutes after the market opened but then rebounded. RWLK subsequently traded enough volume for a pocket pivot. Unfortunately, selling pressure renewed later in the day.

So while RWLK looked great earlier in the day with strong buying pressure, stronger selling pressure knocked the stock lower and lower until it traded lower than its prior day's close, then ended up closing near the low of its trading range.

One had a few chances to sell during the day:

1) After selling pressure increased at which point it was trading in the lower half of its trading range

2) After it traded below its prior day's close

3) Near the close (if the whole position had not already been sold earlier)

Earnings reports can generate a tug-o-war between bulls and bears, thus expect increased levels of volatility on such days. Usually, but not always, the bulls or the bears dominate the day. But once in a while, such as in the case of RWLK, the bulls look as if they have the strong upper hand, but then the bears win out. Or vice versa. 

Thus it is always essential to respect your sell rules when handling any position because assume anything can happen. And as the saying goes, the first sell in the easiest, meaning that if you let a loss get out of hand, it becomes psychologically harder and harder to sell your position. 

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