The BBBY (Bed, Bath & Beyond Inc) Active Long Trade is currently indicated to gap below the suggested stop of 45.00, currently trading around 33.75 in the pre-market session after a disappointing earnings report last night. Due to order imbalances (more sellers than buyers) & as well as the fact that all standing stop-loss orders are immediately converted into markets orders once the stop price is hit or exceeded (such as will be the case at 9:30am ET today for any standing stop-loss orders below yesterday’s close down to where ever the stock opens & trades afterwards today), my preferred strategy for BBBY will be to suspend my stop for the first 20 minutes of trading today, then placing a stop at the low of the regular session.
Such a strategy does allow for the possibility to increase my loss on the trade, should the stock move lower during the first 20-minutes of trading & go on to exceed that low but on balance, I find using this strategy will more often than not allow to exit the position at a better price than would have been if a standing stop-loss order was filled at the open along with all other standing stop-losses plus all of the market orders. In a few instances, using this strategy I’ve actually had the trade go on to hit my profit target as the gap proved to be an over-reaction & buying opportunity.
Should my stop-loss order that will be placed 20-minutes after the open not get hit in the first few hours of trading, I will then raise stops if/as the stock rises.