Key points:
- Diebold stock is up 60% premarket this morning
- This is the result of a single, 10 share, bargain worth $40 total
- It's a real price, but it's not one that can be traded in any volume
Diebold (NYSE: DBD) stock is up 60% premarket this morning on no apparent news at all. This is, of course, very interesting for what would make a stock jump like that when there's no public news about it? On the other hand it can also be seen as dangerous – until we know what has driven DBE stock then how can we know how to trade it? This being something of a problem with trading stocks on the basis of price movements. Yes, certainly, momentum trades happen and can be profitable. But it's still necessary to know what's causing the initial price change so that it's possible to judge when the momentum might stop, or even reverse.
There are certain things we can do to try to work things out. For example, the price jump from $2.49 to the currently reported $4 didn't happen post market. Here're the trades after market close last night:
Yes, OK, it's good and interesting that Diebold stock was up 8% on the day but that still doesn't explain the 60% premarket jump this morning.
Also read: How To Invest In US Stocks From Malaysia 2022.
So, we don't know what's going on here but we'd surely like to find out. It's difficult to think of anything that would make Diebold stock jump like that. Maybe someone would try to buy the company but if so there would have to be an announcement. While the production of ATM and the like equipment is obviously a growing field it's also not something that would spark 60% price rises. So, what actually is it that is happening?
The answer to the Diebold stock price jump is here:
There has been one trade at $4. One trade for 10 pieces of stock – that's a total of $40 value. But in the very thin trade in the early hours of the morning that's enough to shift the tickers. That's the last recorded trade after all. This is also something that does happen.
As to why it happens well, there are two theories. One is just people being stupid – so called “fat finger” mistakes. The other is that someone tried to manipulate the market. Clearly, there's not going to be any great volume of trade done at this silly price and by market open or soon after we'll be back to something closely related to last night's close. But if someone had a derivatives position open and was able to close that out at this manipulated price? That could well be worth losing a handful of dollars over.
This highlights the importance of knowing why a stock price has changed before trying to trade it. The logical step here would be to try and go short Diebold at $4 a share but good luck – because you'll need it – in being able to do that at any volume. Meaning that the actually correct step to take is to realise that it's a highly transient stock price move in a very thin market. Therefore the Diebold stock price is likely to – almost certain but nothing is ever wholly so – revert to something like last night's close as soon as the market wakes up. That is, it's an interesting price move but a nothingburger as far as being able to trade it.