Can we talk? Strategy that is.
You find a promising-looking company based on the fundamentals. The stock is drifting lower so the valuation is getting more compelling. You hold off on buying, waiting for just the right moment. Then Emeril Lagasse goes long and BAM, the stock gaps sharply higher! You kick yourself for not pulling the trigger and buying yesterday. #%#@#%!
You still like the company and want to buy, but how do you handle the volatility? We can't turn back the clock and we can't get a "do over," but we can make the best of the new situation.
Let's look at the price action in Intra-Cellular Therapies (ITCI) as an example.
ITCI gaps sharply higher in the charts above. Sometimes, not always, after an initial, sharp, higher gap up, there is a short, profit-taking reaction. Traders who came in long the issue and are content with the quick profit take it, thus giving you a brief opportunity to buy at a price better than the open.
Unfortunately in this particular case it doesn't happen. ITCI does pull back a bit a couple hours after the opening, but ITCI does not attempt to "partially fill the gap."
Plan B: Do some buying on the open in case the stock continues to climb steadily higher and look to fill the rest of your order on "available weakness."
Available weakness might mean retracing half of this new $50 to $60 range, or around $55.
Now figure out your average price and place an appropriate sell-stop to limit your losses.