to your plan and don’t be unduly swayed by overall market volatility. Like your decision to buy a stock, you should do a bit of homework when deciding to sell. So when bad news causes shares to drop, you’ll want to find out if anything fundamental has changed. If the business still seems strong and there’s a solid management team and strong earnings potential, you may want to hold on a bit longer.
Price Dip Sell signal or buying opportunity?
For the most part, you are going to avoid stocks that have been hammered if there are any of these accompanying factors:
Truly poor earnings results (the company’s earnings were either down or the pace of growth slowed considerably) and subpar guidance
A sharp reduction in earnings guidance between earnings reports
Massive departures of upper management
However, stocks could be buys if the downside driver was:
- A change in opinion by a Wall Street firm
- A negative mention in the media
- Geopolitical or topical news that doesn’t change the fundamentals of a company
source: Be Smart, Act Fast, Get Rich: Your Game Plan for Getting it Right in the Stock Market, by Charles Payne (John Wiley & Sons Inc.; $24.95)