Monday, July 11, 2011

Earning Season

Its that time of quarter again when the new investor looks at stock options and starts seeing big (potential) profit in the Earning Season jumps in prices...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

I wish that  the Microsoft (MSFT) option trade that made me x7 my money had not been one of my first trades. Since it was it gave me a false sense of what the markets would be like. I even told myself "Oh this is easy!" It spurned me on to keep trying to duplicate it again and again.

Something I didnt go into detail about in the video but that makes a big impact to trading are the previous quarters estimates of this quarter. Companies will guess at how much they will make. Investors will then try to jump on that and beat other investors to the punch and the stock price will balance out to what that future news is going to be. This is called having the news "priced in".
Not only that but analyst "experts" will make their educated, and sometimes not so educated, guesses. If a company beats these guesses the stock will generally move up because it beat earnings. If they miss earnings then it will usually drop.

This really confused me when I started out. A company would grow their profit by 10% and the stock drops by 5%. How? Because everyone guessed they would grow by 15% so somehow this is a big terrible thing. The trader can get burned and its one more thing they have to research around earning season time.

To me the power of analysts is frustrating. Someone from Goldman Sachs or Citibank makes an announcement downgrading a company on fear of risk of potential difficulties, nothing even substantial, and a stock drops 5%-10%.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

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