Ultimate magazine theme for WordPress.

PreMarket Prep Stock of the Day: Fat Finger Trigger Rocks Retailers After Walmart Earnings

A unique aspect of the PreMarket Prep Show is that the co-hosts monitor the price action of hundreds of stocks and multiple futures markets during the broadcast.

As a result, any breaking news or unusual price action can be covered immediately.

That was at Macy’s Inc. M at 8:45 am Tuesday when a “fat finger” order was placed entirely in thin premarket trading. What happened and what can be learned from it makes Macy’s the PreMarket Prep Stock of the Day.

What is a fat finger? The name is actually self-explanatory. This phrase is used to describe someone who makes a mistake while typing. It can also be used to describe someone pressing the wrong numbers on a number pad.

Someone with thick fingers is a clumsy typist. Fat fingers cause a keyboard input error and in the case of the markets, refers to an incorrect order being sent for execution.

The trigger’: With Walmart Inc. WMT after his first quarter report, co-host, suffer a caning Dennis Dick observed several other retailers to help our audience identify potential likeability matches.

Many of them traded lower as investors worried that some of Walmart’s peers could have similar reports for the first quarter.

One of the issues he oversaw was Kohl’s Corp KSS, which was on a steep decline right at this point, falling above $1 in less than 30 seconds with no news. That prompted Dick to attempt to identify the catalyst and proceeded to discuss Macy’s price action.

Macy’s makes a 30-second slump: As shown in the chart below, Macy’s went from $21 to $15 in a 30 second bar before recovering to $18.33.

Within minutes it was back to $21 where it was trading before the “Fat Finger” order was entered.

Buyer caution: Investors should be aware that not all trades will freeze below $16.74 and have a chance to bust. In the clip below, Dick explains the 20% cap rule (clearly flawed rule) for issues trading premarket and postmarket.

This price of $16.74 was derived by taking 20% ​​of Macy’s price before the Fat Fingers incident ($20.92) or $4.18. That was then subtracted from $20.92 to get $16.74 and the cap on the downside. If the institution files a complaint with the regulators, there is a chance that all trades below $16.74 will be busted.

The reason investors should be aware of this rule is that if they buy an issue outside of the allotted range, they risk busting the trade. If they sell the issue at what they believe to be a profit, it could actually become a naked short position if the earlier buy-in is not approved by regulators.

Comments are closed.

%d bloggers like this: