This week, the market was dominated by earnings reports, and the 10% Promise team was busy reporting our take on the numbers all week. But there were a few lessons beyond earnings that caught my eye.
Be careful out there
On the surface, the stock market should be a pretty easy system to understand. A bid and an ask price are quoted, and the market ebbs and flows with demand. But the market is far more complicated than that, and even small investors should know about a few nuances so they don't get burned when making trades.
Skyworks Solutions (Nasdaq: SWKS) saw some crazy price action in after-hours trading this week, a place Foolish investors would do well to avoid. After-hours trading is often extremely thin, meaning there are very few buyers and sellers, so the sale of a few hundred shares can send a stock tumbling. Even the first minute or two of the trading day can be crazy, so be careful out there. Using limit orders during regular trading hours can alleviate some of these mistakes and is usually the safest way to trade.
Everyone makes mistakes
Don't think that you're alone making mistakes trading. Big-time investors can be guilty of making stupid moves in the market as well. On Monday, investors dumped 2.5 million shares of Flagstar Bancorp (NYSE: FBC), half of a day's normal volume, in a five-minute span. When a huge trade like that happens, it eats up all of the current bids for the stock, leaving shares to drop like a rock until enough investors come in to buy shares at a depressed price. This is a similar concept to what happened with the flash crash last year, when a big sale of E-Mini S&P 500 futures contracts caused an intraday 1,000-point drop in the Dow before recovering most of that ground later in the day.
This week's trading lesson: Trade during regular hours, use limit orders when possible, and if you're a big enough investor to take up all of the open orders, don't bite off more than you can chew.
If you don't sell milk, don't sell electronics
Sounds like an odd combination right? Hear me out. In December, Best Buy (NYSE: BBY) reported weak sales, citing competition as the main reason for the disappointment. Discount chain Target (NYSE: TGT) isn't taking all of the lost sales, but same-store sales are up as opposed to being down at Best Buy, suggesting customers perhaps prefer the variety of Target -- where you can buy a gallon of milk to go with your big-screen TV.
As if that weren't enough, this week, retailer RadioShack (NYSE: RSH) issued equally disappointing guidance. I'm starting to see a trend here. With discount retailers now selling everything from big-screen TVs to poultry, retailers focusing on electronics alone are becoming dinosaurs.
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More interesting moves this week:
