Trading the bounce after Hewlett Packards bad earnings and weird business decisions

When a company like HP (disclosure: I'm an HP employee) makes major business decisions that no one appears to really understand, and has disappointing earnings as well, the stock market often reacts a little more than strictly neccessary. Great conditions for profiting from a bounce!

HP has been on a downward slide for three quarters now, but this 20% post earnings drop outdid the previous ones even. So there was an opportunity for a bounce trade.

Entry was at $23.77 on August 19, which was a whole dollar off the low of the day, and underneath the lower bollinger band. The bollinger band represents the tension of the movement in price, so when the price is below the lower band, there is a tendancy for the stock to spring back.

The trade hit my 1% per day profit goal after four days, so I put a very tight trading stop in on August 25, and was stopped out the next day. 4.8% profit in 4 trading days. In this sort of bounce, the trades should be short term. The reason is that that when the bounce occurs, it usually then drops off again, just as a ball does. Drop, bounce, drop, bounce, with each bounce getting smaller until the stock stabilizes at the new level.