Longs Get Licked In Stamps.com Off Tuesday's Open

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Stamps.com Inc. STMP shares are trading higher by $1.88 at $85.52 in Wednesday's session. It's hard to believe the issue traded up to $103.99 off the open in Tuesday's session.

The catalyst for the $15+ leap from Monday's close was a better-than-expected Q1 report for EPS by a staggering $0.66 along with a revenue beat of $13 million.

As so often in after-hours and pre-market trading, the Street tends to overdo big rallies or big declines. In fact on many occasions, an issue will reach a level in these sessions that's never reached in the regular session.

The reason for this being is that not all investors participate in these sessions and issues are free to move wildly on much less volume. At the 9:30 a.m. ET open, many of the large players come in to offset positions with other large players with much more ease.

This was certainly the case with Stamps.com in Monday after-hours and Tuesday's pre-market session. Upon the release of the report, the issue spiked to $106 and backed off to the $102 area.

Off the open, the step-down seller willing to offer unlimited amount of shares at lower levels and until the lot is complete moved down to $104 as the issue peaked at $103.99 minutes after the open.

Obviously, that seller or group of sellers determined the issue was way overvalued and began to lower their offers. Within six minutes of the open, it swooned $10 to $94 and the selling spree was far from over. The issue went on to breach its closing price and fell all the way to $82 before rallying back to close at $83.64.

Stamps.com found support just under that level at $81.53 and rallied back into the $85 handle.

Therefore, even if not participating in the after-hours or pre market sessions, another tool for your trading toolbox should be to observe the price action in these sessions. Often they provide key insight to forthcoming trading action in a particular issue.

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Posted In: TechnicalsIntraday UpdateMoversTrading Ideas
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