Page 367 - THE MARKET WHISPERER

THE MARKET WHISPERER 36 3
Publicizing the Quarterly Report for Lexmark, LXK

Lexmark breaks out above $46 [1], and within four days reaches the
planned target price. On reaching a 3% profit I sold 75% of the quantity
I had bought, knowing that the quarterly report would appear the next
day. During the day following the report’s publication, I discovered that
Lexmark had opened with a wild down gap of 9% below my entry price.
The stop order intended for the entry price of $46 executed at the shocking
low of $42, and the 25% of shares evaporated at a huge loss.

Now check the bottom line: a profit of 3% on three-quarters of the stock
together with a loss of 9% on one-quarter of the quantity of stock leads
to the grand total of…zero! Overall summary: I didn’t lose, I didn’t win.
Moral of the story: very simply, do you want to take huge risks and sleep
on a stock right before its quarterly report is publicized? Make sure that
you have realized a handsome profit beforehand for the greater portion of
the shares you are holding and take a calculated risk only on a very small
percentage, if at all.

What might have happened had Lexmark not reached my profit target
before the report’s appearance? I would have sold the entire quantity. In
the long term this is not a problematic phenomenon, since statistically in
half the instances, when a gap is to your detriment, you will lose; whereas
in the other half of instances, when the gap benefits you, you will profit.