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….

 

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March 26, 2014

Help! My stock went up 50%?!?!

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 ….