When do you need to sell?
March 25, 2014
Where have all the small caps gone?
August 6, 2014

What should you do if a stock you are holding goes up 50% in one day?  Yesterday night at 5:30 I found myself contemplating this happy question on ARTX (Aerotech, Corporation), which had gone up 50% on news of a large order from the U.S. Department of Defense.  So, I did what I usually do when confronted with such questions — I used Equities Lab to get an answer.  

How to ask the question?  I chose the most naive query possible:  “Find me all stocks that have gone up at least 40% in just one day”, and then backtested it, rebalancing weekly on Mondays? 

That doesn’t look good!  Maybe I have micro cap stocks (even smaller than ARTX’s 80 million) mucking up the result.  Or perhaps penny stocks are causing the problem…  Either way, I realized I was going to have to investigate further — a possiblity at a 200% gain (.5 to 1.5 in 2010) did not make up for the loss of everything thereafter.  And given that my rebalance period was only a week, such losses seemed to come promptly.  So I put in rules to rule out closing price below 2 dollars, and market cap less than 40 million, and got ….

Decidedly not an improvement!  It was 5:40pm now — if I didn’t come to a decision soon, I would not be able to unload my ARTX even in the after hours market.  But could crossing $5 dollars have made the difference?  And what about before 2010?  Lets see what I saw next….


Wow!  I could sell short with this!  No major updrafts, at least not when compared with the relentless downward trend…  Going back in time we have:

Fine!  lets try the entire time period…

So, thanks to ARTX, Equities Lab now as a short screener that can turn a dollar into less than a penny in 10 years.  Shorting is a dangerous strategy, but I had all the data I needed to go ahead and unload my shares of ARTX.


UPDATE:  I only managed to unload 90% of them — but that should shield me from the worst of the imagined future declines.  I still think the company has huge potential, and may well buy back in after it goes back down some from its spike yesterday (more backtesting to do).  And I still think that the “Estimates Fun Top 10” screen is a fine screen.  It is not its fault that ARTX had the bad manners to go up 50% in one day.  OK, maybe it is…

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Henry Crutcher is an avid family guy, board gamer (think Settlers of Catan, Puerto Rico, etc), computer nut, and all around geek. Hailing from Louisville, KY, he has noticed that the weather in Louisville is remarkably similar to the weather in Atlanta, GA despite the 407 miles that separate them. He has two daughters, one cat, and lots of trees. He loves the Miles Vorkosigan series from Lois McMaster Bujold, for its mix of SF, comedy and insight into how people work. He also comsumes more than his fair share of cheesy business/economics books, such as The Ascent of Money by Niall Ferguson, or Farewell to Alms, by Gregory Clark.

1 Comment

  1. borisn says:

    Aerotech (ARTX) prices: 20140324 $4.14, 20140325 $6.25, 20160825 $2.79. So, great one day gain is followed by poor performance. Great analysis.

    A similar effect can be seen using 4 week lookback. Difficult to implement as a short screen, but stop-gain orders could be used. Doesn’t happen enough to affect overall screen results much though. But if you happen to hold a stock with a very large 4 week return, and notice the increase with little effort, it is probably safe to sell.

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