Let's Restore the Three Day Waiting Rule

After the complete disaster and dodgy excuses by the firm's management in the wake of the Restoration Hardware earnings release and conference call, shares of RH are down more than 28% as I write this. 

On a slow market day, the temptation may be to rush in and stick in a bid for some type of reversion higher. However, just as with DATA LNKD in recent weeks, when stocks see shocking disequilibriums like these, it typically is best to wait three sessions for the players of size to unwind their positions and let those who want out to, in fact, get out. 

The Three Day Rule may seem arbitrary, but it typically saves heartache from those times when a massive gap down (or up) will surprisingly follow-through in the coming sessions before being gravity eventually come into play, if only for a bit. 

That said, you can see RH is back down to its post-IPO highs around $38 from late-2012. This technical area, of prior significance where buyers could easily try to step in, is another reason to keep RH on watch for a long scalp...next week, after three full sessions have passed. 

I will cover this topic and plenty more for Members in my usual Midday Video.