Many novice stock traders have encountered this situation. You are at work. You have heard of news that a well-known company announced huge amounts of income after the night before. You have been waiting for opportunities, so you decide to buy at the market as soon as possible.
Although the price has risen 10% or more at the time of the opening, you can make a purchase and sit down to watch the fun. The first half hour is very good. The price further rose by 10% and you congratulated on your wise purchase.
Then, in about 30 minutes on the trading day, the stock performed exceptionally. Its price rose and prices started to fall. It falls quickly and loses all the gains of the day in one hour. It does not stop there. In addition to one or two buys, its price continued to fall, with the opening price falling by 10% and the previous day's closing price rising by 10%.
In the next few weeks, the stock price continued to rise and fall. When it slowly turned positive again several months later, it dropped by 30% on the price of the return day. So what happened? What we are witnessing here is the classic manipulation of the market's "smart money" to withdraw money from "stupid money."
Clever money is 3% for traders and investors who make money trading markets and stupid money is the rest who lose money, usually smart money. You can get this photo.
The answer is to look at what smart money does. To imitate their strategy, you can also find it once around the winner. The answer is simple and obvious. All that is needed is to point it out. If we search through the well-known company's 12-month stock charts, we don't need a long time to find out who has done so, ie. Display a meeting for several consecutive quarters or exceed market expectations, then decline prices before returning to the next profit announcement after three months.
A sensible currency strategy should be clear. Buy before the earnings announcement and sell it to the buyer on the day of the announcement, preferably within the first 30 minutes of the market opening, during the "madness" period. This is what they must do.
As clever capital dumps their stocks and buyers begin to dry up, the stock price drops and can eventually be considered as a 20% or so "fair price" reduction in the next few weeks. This situation has been happening and these idiots have fallen again and again.
For the time period, the best time is about four to six weeks before the earnings are announced. As prices start to climb steadily, you need to enter. This will happen 4 to 6 weeks ago. Too early, you may find yourself blocked at a loss. Too late, you may miss early returns.
However, entering at the right time may mean that earnings before earnings are increased by 25% or more, before speculation drives prices up. Statistics show that this sweet spot appeared before a calendar month before the earnings announcement.
Use the "ten step" purchase strategy shown in the link at the end of this article to ensure that your diary's location and tags are checked for after-hours announcements and ready when the market opens the next day. Once you have acquired a position and your stop loss reaches or exceeds your buying price, you can track the stock price in the next few weeks.
According to the results announcement, one of the following three exit strategies was used:
The company beat market expectations . If the previous profit model was established (which should be the case), then it is expected that the price will jump overnight and begin the next day's rise. The initial buying frenzy drove prices to continue to rise and then sold at market prices between 15-30 minutes after the opening bell. The total revenue of this transaction may be between 30% and 50%.
The company met market expectations . This means less hype and less open market buying frenzy. Measure market sentiment and prepare to withdraw at market price when the market is open. The total revenue of this transaction may be between 20% and 30%.
The company did not meet expectations . If the previous profit model is not established, then the market exits at the market opening. The total revenue of this transaction from the weeks before the earnings announcement may be between 10% and 20%.
You can see that in addition to any large-scale "force majeure", this is beyond the normal trend of the stock market. No matter which way it is, you will still benefit from this stock trading strategy.
Orignal From: Why is the stock price falling after the earnings announcement is good?
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