Whoa! What Just Happened to My Stock?

Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.

Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners, and see whether they're truly headed into orbit.

On a day when the bottom dropped out of the market and tumbled 165 points, or 1.5%, stocks that went in the other direction are big deals. Yet with movement like that, even a high-flying blue chip can look like a volatile penny stock.

The devil's in the details
Just a day after Ambac Financial's stock plunged, it soared once again, even putting it ahead of where it had been the day before. MGIC Investment (NYSE: MTG) was another mortgage insurer that popped as well yesterday, at one point rising as much as 10%, primarily because it reported better-than-expected earnings.

Yet MGIC, Ambac, and PMI Group (NYSE: PMI) are also benefiting from the unfolding "foreclosure-gate" scandal that threatens to undo banks with major mortgage exposure like Bank of America (NYSE: BAC) and Citigroup. The hope seems to be they'll be able to throw a lot of the mortgage risk back onto the banks.

Perhaps MGIC's earnings signal the mortgage insurers have hit bottom. CAPS member khl1882 thinks Ambac can see the light at the end of the tunnel too:

With the end of the mountain slope in sight, the new management that has been put in place, as well as the low cost/risk involved in buying a stake, ABK is in a perfect position to garner a return in the next few months after the dust settles.

Think the new higher price for Ambac shares is just the starting point? Let us know on the Ambac Financial CAPS page and add it to your My Watchlist page where you'll have all the Foolish news and analysis about this stock aggregated for you.

Making it to the big time
The FDA often ignores the advice of its own advisory panel, so it's highly unlikely that it's going to take the word of the European Medicines Agency when it comes to pixantrone.

As you may recall, Cell Therapeutics was dealt a setback when the FDA said the biotech needed to run another clinical trial before it could be approved. It decided it would appeal the decision, but that requires it to return to the FDA itself. Yesterday's news that the European regulatory authorities accepted its pediatric investigation plan (PIP) apparently had investors hoping the decision would change the FDA's mind.

Yet a PIP is required under EU rules. A marketing application for a drug will be automatically rejected by regulators if a company doesn't submit a PIP first, so the fact that Cell Therapeutics submitted one -- and it was accepted -- isn't as big of a deal as it may first appear. And even if the FDA does move, pixantrone will face stiff competition from Biogen Idec's Rixutan and Spectrum Pharmaceutical's (Nasdaq: SPPI) Zevalin.

CAPS members remain hopeful about Cell Therapeutics' chances, however, as 89% of those rating the biotech believe it will yield market-beating returns in the future. If you'd like a health care stock that's yielding high returns today, click here to find out which one the Motley Fool recommends in its free report "13 High-Yielding Stocks to Buy Today."

Sunny days are here again
Like MGIC, pizza maker Domino's Pizza beat third quarter earnings estimates, as revenues jumped almost 15% to $347 million, handily beating analyst forecasts. Consumers have been undoubtedly swayed by Domino's efforts to reshape its image.

Earlier this year I remarked how I thought its ad campaign touting its crappy product was a breath of fresh air in marketing because they wanted that image to change. They've continued that guerilla marketing tactic with its latest ads urging consumers to send in pictures of their Domino's pizza. When the CEO comes on with one photo showing the cheese stuck to the top of the box and saying how much that upsets him -- and we've all gotten pies like that regardless from where we've bought them -- it seems to be resonating with the pizza-eating public.

trader1994 says their dominance in delivery is what sets them apart, and he's right. Having had family members own local pizza shops, I can attest that while delivery can be something of a hassle for the shop owner because of the costs and liabilities that abound, once one shop does it all the competitors in the area are almost required to do it too.

But let us know on the Domino's Pizza CAPS page whether it can continue delivering solid results.

Going into orbit
Just because your stock has taken to the stratosphere doesn't mean it won't lose altitude. Markets are known for overreacting. A closer look at what's happened to your stock can give you an edge over other investors who merely follow the market's lead.

That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for reentry, or off to infinity and beyond.