Learning to Day Trade - Part 12

Buy the Rumor Sell the News

Yesterday, $AMD spiked big on a rumor that they were going to make chips for $TSLA self driving cars. This was just a rumor but that doesn’t matter. It spiked in a big way and there was potential take make lots on it.

$AMD 1 minute candles

This is one time where I think chasing it would have been OK after finding out the news. I saw it around $13.25 when it was starting to spike and found out the news a minute or two later. I wanted to buy but just wasn’t sure because like always I feel it’s already up too much and because I’ve lost a few times due to chasing.

This was just a rumor and CNBC corrected the article a few hours later:

Correction: GlobalFoundries CEO Sanjay Jha mentioned Tesla as an example of a company working with chip fabricators, but did not specifically say that it was a GlobalFoundries customer.

So, what happened the next day? Fairly big gap down at 4:00 AM premarket but recovered a lot of it. I wasn’t sure how to trade it. At the open I was about to buy at $14.00 to sell into a morning spike. I missed the entry because I hesitated. It spiked and then failed. Dropped some, spiked again, failed. At this point I should have shorted into the $14.15 lower high as it clearly wasn’t able to spike anymore.

  • Rumor - AMD will produce chips for Tesla for their self-driving cars
  • News - Tesla was used only as an example

Buy in because of the hype and clear momentum. Sell before the real news hits. AMD nor Tesla confirmed the rumor and CNBC ended up correcting the article. Plays like these don’t happen frequently and you certainly should not buy something because you hear a good rumor. Always wait for the the reaction. Never be the first to buy.

I suspect it will return back to where it was yesterday in a day or two then eventually back to the $12.15 range at the low end of the channel.

I should note that this happened before with AMD when a rumor was around that Intel was planning to license AMDs graphics for their iGPUs. The spike was not nearly as epic as yesterday but it uptrended for a day or two before the rumor was denied and the stock plummeted. Never trust a rumor. The AMD/Intel GPU collaboration was infact real.


Dip Buying Morning Panics



Disclaimer

I am not a registered financial adviser/broker/anything. Use this information for entertainment/informational purposes only. Any tickers mentioned are not recommendations to buy/sell/or sell short. They are used as examples only.