Earnings reports- Why do they seem to to trash stocks

J

JimBob56

I'm new to this game and I'm wondering why stocks seem to go in the dumper on earnings reports. I can understand if there terrible but what about the ones that aren't.

MTG down 5% on open. Decent earnings

DNA down 3% on excellent earnings

CPWM down 5.5% on open on sub par earnings.

Do the stock makers manipulate the open to shake off the speculators? It seems to me they drop the stock far enough to get you to bump into your stop losses. Then they start to pull it back.

Thanks for any words of wisdom.
 
You answered your own question in your very first sentence when you said:

"I'm new to this game "

That's it...all this Wall Street, Trading stuff is one big game....

The Worlds Largest Casino said Nicky Darvis and he was right!

Quarterly earnings trading is just another tool used to play the game to keep the game going each and every quarter each and every year..
 
You ever notice on the news or in the papers after wall street has a down day they say:

"Investors just took profits today"

Investors? HaHaHaHa

Traders run the market, not investors! But all Joe Blow hears is investors and how he should be one....Invest in a mutual fund Joe Blow....HaHaHa

Don't panic if the market is down 400 points Joe Blow. It's nothing more than investors like you taking profits..
HaHaHaHa
 
Its because everything is already way overpriced assuming everything will be bought out.

So as soon as any news comes out, and its not a buyout, everybody takes their profits while they can.

Do the same or find yourself holding the bag.
 
Joe Blow recipe

2 shots vodka
1 can Fresca® grapefruit soda

Add vodka to fresca in a glass.
Serve in:
Old-Fashioned Glass
 
I would suggest taking a few months to actually learn how the financial markets work.....

A good read is William O'Neill's books...read IBD newspaper...

O'Neill explains the mechanics and inner workings of the process, including earnings and the resulting action of those stocks...


Start reading the WSJ front to back....you will start to get in the flow of the market....

Most on ET don't like knowledge.....interferes with their trading, till they blow-up.....then it is manipulation....LOL


SteveD
 
Quote from SteveD:



Most on ET don't like knowledge.....interferes with their trading, till they blow-up.....then it is manipulation....LOL


SteveD
More...



Haha, how much money did you lose trying to trade??? :D
 
JimBob56,

Supply and demand.

The Market Maker has already anticipated the demand, and has already borrowed a heck of a lot of stock in order to go ‘short’ and balance the incoming 'buy' orders.

Of course the Market Maker is making the 'short' $ off of the naive guinea pigs who are all scrambling to chase each and every up tick. The more they chase the more the Market Maker ‘shorts’!

After the dust settles you are dazed and left naked out in the middle of the desert scratching your head.

Yes, it’s quite a game.

You loose!!

Tom
 
In the beginning I was down about $10,000-12,000....


But, understand I had been a fairly active investor for many years....I bought some of Compaq stock just after the IPO...in the early 80's, I think....

I did not have the usual learning curve of a newbie....the Direct Access Platform is great....I know what I want to do...just don't have to telephone a broker, LOL.....


I got a Series 7 license in the early 90s.....learned a great deal about the market and how it works.....very important for a trader...

Good luck

SteveD
 
My opinion is that virtually anything can happen during an earnings call. There is no way you can tell beforehand which way the earnings call will turn the stock.

Of course, you can create a detailed thesis as to why you believe the earnings call can make a stock go this way or that, but during the call anything can be said that will dump the stock.

Many traders will simply cash out before the earnings call because the risk far outweighs the reward.

I have found that when a lot is expected of a stock (like RIMM) the earnings call will most always prove negative even if the earnings beat estimates or were "in-line". When very low expectations exist, even bad news during the call can create a nice rally in the stock. Of course, this is just theory and not always true.

In the end, there is no way of really knowing. You can postulate and theorize what will happen during the call, but holding the common into the call is generally a gamble.
 
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