Falling Friday: Giants GOOG and GS Plunge
In what can be described as the “music stopping” in a long round of musical chairs, the stock prices of Google (GOOG) and Goldman Sachs (GS) plunged Friday morning, shocking investors after both stocks had advanced in a seemingly endless rally.
Let’s take a quick look at both of these stocks’ daily charts to note the rise and fall.
First, Goldman Sachs:
Headline news recently broke (via the Wall Street Journal link here) that the SEC charged Goldman Sachs with fraud from transactions involving the sub-prime crisis.
This sent the stock plunging 13% (as of noon EST), erasing a month of steady gains in price. Volume surged as price fell.
Next, Google:
In one of those extremely frustrating experiences for new (and even seasoned) investors, Google reported upbeat earnings but did not achieve the “whisper numbers” of analysts with their quarterly profit numbers. Analysts also feared if Google could keep up the pace of profits into the future. Despite reporting a stable profit, shares fell sharply overnight.
I wrote a post entitled “Why Might a Stock Fall on Good News?” which explains in part why a stock price might fall despite good (or perceived good) news.
Keep watching these stocks for any sign of an ‘oversold bounce’ or if price continues to slide.
The decline in these (and other) stocks have send the US Equity Markets down over 1% so far this morning.
These are breaking stories, so keep watching these stocks for any sign of an ‘oversold bounce’ or if price continues to slide.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
It might be frustrating or you can take advantage of it and buy more. That is what I did with Google. Most of the time if the market behaves in a way you think is wrong either you can make money or you are wrong.
That's true!
What I meant by frustrating is that the company produces excellent earnings and all seems well… but the stock falls hard anyway. It would seem like good news should produce higher prices, but that doesn't always happen. Markets look to the future and already have discounted the present.
But that's a good point there!
Hey Corey. Thanks for the great article!
This is one of the reasons I only trade ETFs. It only takes a couple of these hammerings to realize that the risk is too great. Check out the VIX today, wouldn't it have been nice to catch that wave.
Cheers,
Dan
Dan,
Good point. I used to swing trade stocks back in the 2004-2006 period but then moved to sector ETFs then futures. So much easier to be in futures.
Nice point about the VIX!
it is not just google and goldman sacks falling. $vix is spiking. i am thinking the market is having more chances of going down further, like the falls in January.
True – I'll do a SPX update soon once things settle.
GOOG and GS are both leaders – not good for the overall market moving forward imo
It's looking a possible bear flag here on the SPY, no?
It might be frustrating or you can take advantage of it and buy more. That is what I did with Google. Most of the time if the market behaves in a way you think is wrong either you can make money or you are wrong.
That's true!
What I meant by frustrating is that the company produces excellent earnings and all seems well… but the stock falls hard anyway. It would seem like good news should produce higher prices, but that doesn't always happen. Markets look to the future and already have discounted the present.
Goldman's news came out of the blue (at least in terms of fraud charges), but the selling/hedging is an issue that's been in the news for a while.
But that's a good point there!
Hey Corey. Thanks for the great article!
This is one of the reasons I only trade ETFs. It only takes a couple of these hammerings to realize that the risk is too great. Check out the VIX today, wouldn't it have been nice to catch that wave.
Cheers,
Dan
Dan,
Good point. I used to swing trade stocks back in the 2004-2006 period but then moved to sector ETFs then futures. So much easier to be in futures.
Nice point about the VIX!
it is not just google and goldman sacks falling. $vix is spiking. i am thinking the market is having more chances of going down further, like the falls in January.
True – I'll do a SPX update soon once things settle.
GOOG and GS are both leaders – not good for the overall market moving forward imo
It's looking a possible bear flag here on the SPY, no?