Hello to the new traders
Wanted to cover on of my favorite phrases that you have likely heard here before
“buy the rumor, sell the news," I’m sure you have noticed that stock fall with good news.
This phrase is the tendency for traders to push up a stock's price on rumors or expectations and then sell once that news has been released, even if the news is positive. This phenomenon can be one of many reasons why a stock might fall with good news and is often seen with stocks releasing earnings report.
Publicly-traded companies are required by the Securities and Exchange Commission to publicly report earnings results quarterly, four times a year.
While it provides a great deal of transparency it can also lead to a build up of rumors as there is a three-month gap between each release. Moreover, any substantial discrepancies from expectations or any drastically surprising announcements will also influence a stock’s price.
A stock’s price is based heavily on the estimated expectations and actual results investors and analysts have for the firm's earnings and cash flows, both now and in the future. When a company releases an earnings report, a fundamental reaction is often the most common. As such, good earnings that miss expectations can result in a downgrade of value
For example, let's say analysts expect XYZ Corp. to report earnings per share (eps) of $0.75. Say the company announces EPS of $0.80, beating expectations by 6.7%, yet investors respond by selling shares. While the news was "good," perhaps investors expected more. For instance, if the firm has a history of beating estimates by 10% or more, this relatively smaller beat may be seen as a disappointment. With this scenario, investors may also decrease their appetite for the stock resulting in a lower price to earnings ratio.
A company may release results that match or exceed the market’s expectations but with that they may also include revisions to future estimates that can be a valuation detractor. Any downward revisions to future sales, earnings, cash flow, and more could lead to concerns over the stock’s future value. Downward revisions or developments that decrease future value expectations can be a fundamental reason why a stock might fall alongside good news.
Key take aways
* With each earnings report, companies usually also provide some future guidance. Future guidance is also a big factor for fundamental valuations
* Good or bad news about a company often leads to short-term stock price changes and higher short-term volatility.
* There are many possible explanations for a stock's value declining despite good news being released.
* one of the most important things for an investor to do is remain calm and consider both the time frame for your investment and the reason you bought the stock in the first place. Stocks can see a lot of short-term volatility following any new announcements and particularly announcements that are surprisingly good or bad. If a stock holding is part of your long-term portfolio, it can be important to revisit or potentially change your investment thesis with new announcements and developments. If the release of good news remains inline with your investment thesis and a sell off occurs, it just might represent a buying opportunity for you and a chance to add to your long position at a relatively low price rather than selling with the crowd.
Im not sure if you would like an Instagram account but someone Asked for it what i would hope to cover on it are
-my daily position
-long term position
-companies that are emerging
- and possible entry and exit points
But the handle is dailymarket_tips it should say webull $SENSEONICS$Tonix $GLOBALSTAR $Castor Maritime Inc $SUNDIAL GROWERS INC. $Ocugen Inc $Zomedica Corp $Advaxis $Citius Pharmaceuticals Inc $SUNDIAL GROWERS INC.
Disclaimer: The comments, opinions and analysis expressed herein are for informational and educational purposes only and shoulk not be considered as individual investment advice or recommendations. Webull is not responsible or liable in any way for comments posted by pur users.