Scanning for Potential Daytrades, Vol. 1
Skip The Takeovers
This morning OPEN (Open Solutions) is bid at over 37 from a previous close of 30.28. Put it on the watch list? Not so quick! Check the headlines: Open Solutions confirms deal to go private.
When a company is being taken over, you’ll see a big gap, but it’s not usually a tradeable gap. The price will open up and stay pegged (i.e. go sideways) for the entire day. The rare exception is when a company is being bought with another company’s stock, and the purchasing company begins falling precipitously during the day.
The upshot? We’ve got enough to worry about. When we see a big gap that’s due to a takeover, we should cross that stock off our list and move along to greener pastures.
(This one is old hat to experienced traders, or inexperienced ones if they’ve ever tried to trade a takeover, but it may save some frustration for someone who is just converting to daytrading.)