We teach our desk not to fade weak stocks.  But there are plays on the Open that look like the stock is weak.  Actually they are not.  And these plays are given the green light to fade.  We had such a setup in MCD on the Open.  Let’s discuss.

MCD opened near 58.33, could not hold and traded lower.  MCD could not hold 58.25 and traded lower.  MCD could not hold 58.15 and traded lower.  MCD could not hold 58, after some decent volume, and traded lower.  MCD traded down to 57.75.  This must mean MCD is weak right Bella?

Usually, but not always.  What was different about the downmove in MCD on the open was the bid buying.  There was significant bid buying at 25c, 15c, 58, 57.85, 57.75.  Ok so the stock was trading lower.  But there was so much bid buying.  And it was still so early in the AM.

I do not trust the trend of a stock until some time has elapsed on the open.  When I see significant bid buying I understand there is a chance that the stock will reverse.  And if it does I know that this stock may reverse quickly.  Hitting the 57.75 bid may be met with an upmove to 58.25 in a few ticks.

So for all you MCD haters on the open, you missed the bid buying.  Look for this on the open.

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