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Can Someone Explain To Me Why PreMarket Gains Drop Suddenly When Market Opens
Posted on 9/2/20 at 8:55 am
Posted on 9/2/20 at 8:55 am
Just what the title says. I am really kinda new to the stock market and there are a couple of things I don’t understand.
It has happened several times lately (including today) where premarket stock prices have risen sharply. For example, AAPL was up $4.36/share pre market. As soon as the bell rang at 08:30, it plunged sharply down to losing $2/share. Not just Apple but a large number of stocks did this today and many other days. Why is the logic there? Who is paying those pre market prices? Why do they drop so sharply at open of market?
It has happened several times lately (including today) where premarket stock prices have risen sharply. For example, AAPL was up $4.36/share pre market. As soon as the bell rang at 08:30, it plunged sharply down to losing $2/share. Not just Apple but a large number of stocks did this today and many other days. Why is the logic there? Who is paying those pre market prices? Why do they drop so sharply at open of market?
4
Posted on 9/2/20 at 9:01 am to Jibbajabba
Looks like a selloff going down, this was bound to happen eventually. The reason for the sharp increases/decreases is volume, a lot of people moving money all at once.
This post was edited on 9/2/20 at 9:05 am
Posted on 9/2/20 at 9:08 am to Jibbajabba
as above, premarket is very low volume
Posted on 9/2/20 at 9:22 am to cgrand
quote:
as above, premarket is very low volume
I am by no means an expert, but volume plays a role here. I think it has something to do with Bid/Ask spreads being wider in post and pre market trading periods, giving a false sense of where the stock is trading. It also might have to do with traders setting buy and sell orders at particular prices that are only good during normal market trading hours. So when 8:30 hits, all of those process (if they are able to given the order specifics).
I could be wrong though... that's my amateur take on the situation.
Posted on 9/2/20 at 9:56 am to bass
quote:
Looks like a selloff going down
If it were only apple and Tesla dropping like a rock, I could understand that. It just seems that when it happens, it happens for lots of stocks at the same time. Like today... WMT, baba, yeti, and wkhs all did the exact same thing at the same time.
Posted on 9/2/20 at 10:08 am to Jibbajabba
quote:
If it were only apple and Tesla dropping like a rock, I could understand that. It just seems that when it happens, it happens for lots of stocks at the same time. Like today... WMT, baba, yeti, and wkhs all did the exact same thing at the same time.
I'm sure automated rebalancing of trillions of $ makes an impact, too. When there is massive growth, portfolios get out of balance and so managers and robo systems will sell off higher performing stocks and move the money to the lower parts of the portfolio to maintain the percentages of the portfolio.
Posted on 9/2/20 at 10:19 am to Jibbajabba
quote:
Why do they drop so sharply at open of market?
Several possible reasons:
Profit taking at US cash open
Machines kick in and often squeeze overnight inventories
if it's out of balance from previous days close.
Testing the overnight gap
Hit a pivot
Posted on 9/2/20 at 11:48 am to Jibbajabba
Limit sell orders and the shorts at work.
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