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the earnings and situation of each stock. Normally, you need to know what the expectations have been in order to understand whether those expectations have been exceeded or disappointed. If a stock earns $0.99 a share, is this good news or bad news? It all depends. If the market anticipated $0.82, then the news is good. If the market anticipated $1.01, then this could spell big trouble. Lately, anticipating stock directions after the reporting of earnings has been a relative crap shoot. Apparent good results can be interpreted as bad and bad results may be considered as good because there are so many ''geniuses" and "experts" whispering so many "informed" numbers that no one really knows what is going on. Therefore, the direction of a stock after the release of earnings can be anyone's guess. My advice is to wait and see before chasing your tail after earnings are reported. |
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Some news is so obviously devastating that even the Three Stooges would recognize disaster; however, profiting from this type of news may be difficult because usually it is announced before the opening of trading or after the close. A gapped-down opening is most likely, perhaps a significant percentage of a stock's former price. For example, after negative news, Oxford Health Care opened down over half of the previous night's closing price. The trading decision at that point was whether one bought the stock at this level or shorted the stock in anticipation of further decline. It turns out that if you shorted Oxford, you would have been a significant winner, despite the fact that it had dropped so precipitously compared with its former price. This example illustrates why I usually recommend that traders go home flat. This type of excitement you don't need! |
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The opposite scenario can be just as true. News can be buoyant to stock prices. For example, merger announcements, takeovers, management changes, stock splits, big contract awards, FDA approvals, and other good news can spike up the price of a stock. Once again, however, most of these events are announced before the opening or after the close, and therefore the opportunity to trade within the move is remote. Most likely you will have to make a trading decision based |
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