How Your Emotions Affect Stocks

Written by GSCR Staff   
Tuesday, 18 December 2012 11:02

No one will deny that the tragedy last week in Connecticut was one of the most tragic days in recent history in our country.  The unspeakable horrors endured by parents and loved ones make all of us appreciate the people in our own lives and mourn the losses they have suffered.

And of course, it only takes a few hours and the gun control debate starts up again.  No matter what your stance on this issue is, there is no denying that the impact was immediately felt on Wall Street.

Smith and Wesson Holding Corporation (NASDAQ – SWHC - $8.65) hit a 52-week high of $11.25 in September and has been on a slight decline since.  The stock was at $9.90 Friday, and at the time of this article being written down to $7.88.  That’s more than $2.00, or over 20% in just two trading days!

The stock was on a run up until the September high, and some of this sell-off is just profit taking.  However, no one can deny that the events in CT, NYC, and Oregon have impacted this discussion and the Street is starting to price in stricter gun control laws.  Again, showing the power of emotions in the market, or what the insiders call behavioral finance.  This is a classic example.

May we all remember the victims especially this holiday season.

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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