Wednesday, March 10, 2010

Opening DOWN

Yesterday I bought some stock at the Open (which was a drop from the previous day's Close) and (surprise!) that turned out to be the Low for the day.

So I lay in bed thinking:
Does that happen often?
If the Open is down from the previous Close, can we expect a further decrease from Open to Close?
How much of an additional drop will there be ... on average?
If I buy at the Open (after a drop), should I have waited for an additional drop?
What if ... ?

Anyway, to make a long story short(er), I hopped out of bed and whipped out an Excel spreadsheet.

  1. I downloaded 10 years worth of daily price data.
  2. I identified days where the stock Opened down.
  3. I checked out the subsequent Low for the day.
  4. I plotted
    average decrease: Open-to-Low
    versus
    Previous Close-to-Open.
  5. I stared intently at the chart, expecting to see something exciting.

Not too exciting ... so I went back to bed.

Wanna play? Click!

Alas, when stocks split, the change from previous Close to Open can be screwy *$%#@!?

Here are a few more:

Huh? Is that "additional" drop, Open to Close, (almost) always close to 1.0%-1.5%?

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I should mention that them percentages are:

(previousClose - Open)/previousClose

and

(Open - Low)/Open

so they come out as (positive) "drops".

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I also noted that, sometimes, the larger the drop the larger the drop:

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P.S. Because of nico's remark, I now count the numbers:

and I even got me a tutorial, too.

 
Posted by Peter at 5:34 AM
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4 comments:

  1. Dan9marMarch 10, 2010 at 8:38 AM

    Many days the stocks open lower than the previous day's close. Because of that gap, a stop order will cause the stock to be sold at less than the stop price. That is why I don't depend on being able to reliably limit my maximum loss.

    ReplyDelete
  2. PeterMarch 10, 2010 at 2:05 PM

    I find that stocks drop about half the time.
    On the spreadsheet, you can see that:
    http://i43.tinypic.com/2vubt50.gif

    I never use STOP orders.
    For me, it's much more entertaining to Buy / Sell at market.

    For me, it's the adrenaline rush :^)

    ReplyDelete
  3. AnonymousMarch 10, 2010 at 6:31 PM

    Dr. Ponzo in the List1 routine n should be equal to Range("I1"). If we leave n equals to Range("k3") then we will loop through the first 1113 values; skipping the values in the range L1121 to L2532....k3=COUNT(L9:L3000) does not count blank cells, and List1 routine is already skipping those cells.

    nico

    ReplyDelete
  4. PeterMarch 11, 2010 at 1:29 AM

    Thanks, nico.
    All fixed now.

    When I said I hopped out of bed, you can see I was still half asleep :^)

    ReplyDelete

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