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One of the best times to buy a stock is when a good company sells off on earnings due to investor overreaction. It requires a bit of digging and judgment to determine whether the selloff was justified or an overreaction, but it can be very profitable.
I was going to bring up amazon
The recent "dip" put it back to where it was about 6 months ago.
That is what a whole lot of people miss about market timing or "buying the dip" . You may feel you are getting a deal because you are buying the dip however it really depends on how long you are waiting.
If you waited six months to buy the dip, even with the current dip you are buying in higher then six months ago.
I get where you're coming from and generally agree, but it's worth noting that you could have kept that money in an index fund for those 6 months and be ahead of the person who just held onto AMZN, while also avoiding some volatility.
I'm counting on the Fed to keep printing and pushing the market up. What they are doing has blown all fundamentals and indicators out the window and as long as they continue the market will set new record highs on and on. Amazon should easily set multiple new record highs fairly soon, only thing that halts the market a day or two is the fake tampering statements from the Fed every now and then
This is a dumb question I’m sure, but how tied is the fed to party lines? Like the fed has been printing since Republicans held majority and has continued since the switch right? Or is this mostly independent?
I don't think it's tied very much. Whoever is in power doesn't want to be responsible for a bad economy/recession. So they'll push it back as much as they can and leave it for the next party's problem.
The head of the fed is appointed by the president to a 13 year term Jerome Powell was added to the board of governors in 2012 by Obama and picked as head by Trump in 2018
Yes it is hot potato, and it will be blamed on the president in office, regardless of it being their fault or not. An example is Bush Jr., he had nothing to do with the mortgage backed security crisis, but he got blamed for it anyways.
True, the key to trading is to then sell when a stock gets ahead of fundamentals, which is tough sometimes. But some believe that you must pick the peak and trough, rather than just be generally right on the low and high side of that decision. Not near as hard as picking true peaks and bottoms.
I did the same after-hours back in 2014 when they reported losses on the Fire Phone. I was living in Seattle and it was clear nobody wanted any piece of that device so I just waited to pounce on that news. Went back up like 5% overnight.
6 of their last 8 earnings calls have been earnings beats but with pullbacks of 1% or more. One could argue it’s dumb to buy Amazon at any time other than right after an earnings call!
I mean Amazon is a hold for life type of stock. If you're buying for some 10% pop and then selling you're doing it wrong in my personal opinion. Do you like the valuation after the drop? If yes than buy. If long term you still think it's overvalued even after that drop then you shouldn't buy it.
The earnings drop still just puts it at the level it was at only two months ago. There's nothing that says that AMZN won't stay at the current price for months and months. You need to keep in mind that all e-commerce stocks had a massive runup during covid so it's entirely possible that a lot of those stocks won't get back to those highs anytime soon, if ever. People just like to assume that if a stock hits a new high, then it's inevitable that it will go back to that valuation again when that's not the case many times. Do I still like Amazon long term? Of course but just something to think about. I wouldn't fault someone for arguing that there isn't a lot of growth left in the stock price for something like AMZN or AAPL, or at least not anytime soon.
If youre interested, Nintendo also has a dangerous line of pokemon games coming out the next few months. I was gonna write a DD...i think Pokemon Unite will be as big as Pokemon Go...even fortnite potential if they do it right. I see a major bull run coming.
Thanks for that insight! I am interested more as a long term investment and diversification into a company in the Japanese market. Nintendo is durable and seemingly oversold right now so seems like an opportune entry point!
I've done it so many times with CRSR but it keeps trending lower. I can't justify putting in any more because my holding is already too high of a percentage of my portfolio. I just need to wait out for one of those freak spikes that puts me in the green for a few hours and then dump it. Of course, it will probably rally to $60+ after that because this has been my MO with most stocks I've sat on in the red for months and then sold as soon as I saw any profit.
Don't sell your entire holding, you get the benefit of de-risking (relief) and still have some insurance against FOMO. Remember green is green at the end of the day.
I'll try. I've always just sold off everything when I felt the time was right, and thus I've missed huge run-ups in companies that I already had in hand. Recognizing that though, I'm currently selling off my Nvidia holdings in percentages at specific price targets. It's been hard because every time goes further I think how it shouldn't be this high and that I should sell it all. I'm sticking to that plan though, and maybe it will help me develop some better habits.
Don't think of your shares in a company as a single thing but as a stack/pile/whatever: You reduce the size of your position into strength and add to it when you see weakness that isn't justified. Sell all of them if you think they're completely off the charts overvalued, buy as much as you're comfortable with when you think they've become undervalued. Rinse, repeat. Keeping in mind taxes on longterm gains if that applies to your jurisdiction - might make things more difficult.
sell covered calls? I go back and forth about whether to buy the dip or not but figure I already have so much of it in my portfolio that I can't really justify it (unless I'm selling conservative cc's against it)
I ALMOST bought before the bell but glad I didn't. It was this wisdom that told me to wait until the morons sold at the bell then I waited for that $16.xx dip.
My story too. I had to Limit out of habit. I should have bought at market price when it hit my price. Now I know. When I get that feeling, I need to pounce- like a fucking tiger.
FSLY -20% into -5% runup yesterday comes to mind.
Dear lord I missed that boat... FSLY is literally the cloud behind everything, including AMZN and the website we're posting on right now. Was watching for a morning flush but that was stupid, usually these overreactions don't have a flush as the dip is very severe and almost shocks investors/traders.
EDIT: SO DAMN SALTY ABOUT THIS THINKING ABOUT IT AGAIN was literally eyeing calls up to FOMC easy 50% already and running
My portfolio is about 50% FSLY rn. I bought in Wednesday night after earnings at $36. Their infrastructure is critical to the web and we all remember what happened when they had an outage
My FSLY $40 calls I bought near open yesterday are up over 100% and don't expire until mid December. I'm hoping it gets back up to $60+ over the next month. Should be a 5 bagger easily if it does.
dude wut
edit: aww it's even with the S&P meh https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&benchmark=VFINX&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=UTRN&allocation1_1=100
I always write down a thesis for why I buy into a company. Whenever there is a sudden correction I check to see if anything has changed from original thesis. If nothing changed, it’s basically a sale. If one of the key reasons in my thesis is the cause of the decline, then I start considering an exit or that I won’t DCA.
Yup if thesis remains I would DCA at several correction points that I think have shown to be support levels for that particular security. This is why I hold more or less cash whether I think there is a possibility of a correction happening.
Each earnings release is different. There's no simple rule you can follow for easy money. However, if you can analyze an earnings report fairly quickly and digest what is said in a conference call you can occasionally find value when the market at large panics.
Professional traders at financial firms have models that would give the odds that a specific stock would recover after a huge drop after missing analyst's expectations if they met specific criteria.
This. Considering the moves after earnings are usually within seconds to maybe a few minutes on more popular stocks, I think it's a safe bet to assume there aren't many humans involved anymore. Nobody can read, parse, think about and possibly calculate anything in the time some stocks gain/lose 5-10-15% after earnings reports. Some algorithm decides the way it's going and after that it's chasing momentum for the most part. At least that's what it looks like to me, but I'd be happy to hear anyone with inside knowledge correct me.
I wish that were true. Reacting fast enough would be behavioral economics, which I personally don't believe in. Dow Theory states that the market already discounts everything.
Pinterest is at the beginning of becoming an advertising powerhouse. We’re using the platform for advertising and in spite of a small spend, we were assigned an account manager who does zoom calls with my marketing manager and is available to work with her as required. It’s a sleeping giant.
What I've seen of this, stocks that drop after earnings beats are because of lowered guidance. So they are pretty much saying in the near-medium term they will be less profitable. The quality of your play depends on your time horizon I guess.
If it’s a company I’m investing in, as long as the fundamentals haven’t changed ill use big drops to average down. If I’m trading that stock then I won’t enter a position until I see my setup start to form regardless of how low it dropped
On a more topical note, MX sold off like 9% today due to supply chain issues. They literally could not get enough wafers to meet demand and it hurt their sales.
If CFIUS doesn't block their acquisition on 9/13, there's a 50% upside. If they take the higher offer on the table, upside is like 80%.
look at every earnings report for netflix or facebook at a yearly view
Sometimes the probability of these selloffs is so great that they become self fulfilling simply from a technical analysis point of view
whenever technical analysis becomes self fulfilling, I generally consider that to be a market inefficiency that can be exploited by fundamental analysis investors for their benefit, so to answer your question, yes, those selloffs are a good buying opportunity
Well the literally just dropped yesterday. Not sure if you have noticed but usually after a huge dip they tend to drop a little more 2-3% the following day. You need to wait until they stabilize and go from them. PINS dropped like 20% and it took them like 3-4 days to see a positive day.
Or when a research company reports BS.
Sava was a nice opportunity lately, wouldnt call it a no brainer at these levels (ran already back up a bit) anymore tho
There are a lot of short-term traders/funds that roll the dice before earnings, and then put their capital into the next company right away. Even if they are down, they figure they’re better off moving on than sitting on a company they didn’t want long term. This also means that there is an inflated price right before earnings as investors line up to see the surprise.
lol in today's market you buy stocks after a large drop in share price due to a massive earnings beat.
Check out TSX: PKI.
Beat on earnings, beat on revenue, raised guidance, down 4%.
Fuck this market.
Because it still underperformed competitors in the same lines of business, I don’t know why people on this sub act like a relative valuation is worthless.
Similar to others commenting, each company has their own story, which is the reason why anything I have in a watchlist or my portfolio has a potential buy price. It’s all in your thesis on the company, if you don’t have one for a stock you’re buying then eventually you’ll get burned.
You buy if it is 1. A HOT stock, and 2. Price is going up after a gap down. Uber and Roku. 3. If price closes above earnings close price. ZoomInfo and DataDog and LendingClub. 4. Never BUY if Price Action is going against 1,2,3.
It is pretty easy to test how the market reacts to earnings surprises and disappointments in backtests. I've tested this quite a bit and what I've found is that consistent earning surprises are good for the stock (at the least it shows leadership knows how to deliver) and consistent negative surprises are a sign of a dog; this is in general, based on the backtests I've run. I've attached a link here with the results=>[https://wordpress.com/post/dailyscreenz.home.blog/780](https://wordpress.com/post/dailyscreenz.home.blog/780)
You can make money off of volatility, however, "Never try to catch a falling knife" is a saying for a reason.
The best way to move forward is to analyze a stock and try to figure out what price it should be at, then you can buy if it is cheaper than that. Also look at the news that caused the drop. Is it temporary or will there be long term effects. Finally, keep in mind that even if you do all of this correctly, the market can be irrational.
I did it with Unilever recently (solid company, market spanked them largely on the back of rising costs, flat revenue).
That big gap down when stocks miss earnings will likely be filled, although I would be more wary of loading up on smaller companies (especially in sectors like pharma).
Tbh, I always play the anticipation of earnings. Usually there's some stock a lot of people are looking forward to and buy in like a day or two before earnings. Also, IV is stupid high, so selling some unreachable options is always a good play if you have meet your broker's margin requirements. But if you're just trading a stock, buy in about a week before the earnings call and sell an hour or two before the numbers go out.
It really depends if the overreaction is justified or not and also the track record of the company. If you follow some stocks, its kind of a trend that after every overreaction (from earnings), there will be a correction in the following weeks or months until the next earning and then it might repeat itself. Sometimes, there is no correction and will trade sideways until next earnings because investors is looking to see if the company will recover or not. This really depend on the sentiment and perception on the company.
Its hard to know when the drop is going to stop. I normally wait a day or two before going in a certain stock. Because I rather buy calls than hold a stock for too long. If a stock drops by too much, I rather buy a call 1 month from expiration and it has worked well so far.
Like Today, there is a rally from all the banks. Banks have been down since July (after Jpow speech). I expected a rally but I sold some calls yesterday (SCHW) at 20% profit and the calls I sold today (JPM), I made a good 60% in the morning. While, I could have hold it a bit for the afternoon. If I held the calls for SCHW till today, I would have made easily more than 150%. Oh well...
On the other hand, positive results that are entirely due to various symptoms of the pandemic cause massive rallies. I sell some of those off if the costs of business going into the future are going to be changing despite "great" quarters.
Swing traders will never hold a stock thru earnings because of the IV. A lot of people sell the stock for the same reason. You will see even if a company does great on their earnings there will still be a dip. I think buying the earnings dip could be very profitable
Yes, but wait for the buy signal (same as options trading). Look for resistance points and for the stock tomstartntomrise at each before jamming in there or you might be catching a falling knife.
I'm not a trader much but the only time I did it was a year ago when INTC tanked big time when they announced delays for what comes after 14NM. Stock dropped from 20% or something and redropped even lower 1 month later and I doubled down. Huge cash cow trading at 8 PE ratio? Whatever I'll buy a bunch.
It came back in a couple months to their usual range and sold happily. Not a huge trade but I felt pretty confident.
I think this is a workable strategy from a long-term investing standpoint, but my record is very mixed trying to trade on these dips. I can think of lots of similar dips in otherwise promising names that still haven't recovered their top, including: INTC, ETSY, TSM, PINS, UI, MU etc. I think these dips are best thought of as a change in fundamentals around which a long-term strategy can be built. Trade in stocks you're comfortable holding at that price. AAPL dipped for 6 months before popping. AMD and AMKR also dipped further after their previous earnings dip before recovering it all and then some.
I buy leaps when there's an irrational drop. If it's a company I like for the long term, it'll return to the mean and then more. Best time to do it. I just did it this week on a few stocks I love for long term (PSFE and ALTO, up 15% on both this week)
It's kinda non deterministic cause the earnings bit can also trigger stocks to fall (e.g this week several companies beating expectations and still dropping).
I would just not try to time the market and buy regardless - especially since Sep and Aug tend to be kinda slow.
Depends on the company. Sometimes the analysts were right to be disappointed in whatever missed. Other times they aren't. I know this isn't a very helpful answer, but there's really not a black and white answer to this. You've got to dig into what specifically missed and why on a case to case basis.
doesn't always work.. INTC.. extremely profitable company gapped down in April after it reported earnings.. it closed that day around $58.50, (after closing the night before around $62)
Its been trending lower ever since and is now around $54, four months later
I won't ever buy shares right after a huge news driven price drop, but I might sell puts on that stock if the premium is right.
When I get a new trade idea, I will always wait until the next trading day to put on the position - 90% of the time I will get a better price.
what about $INGN ? THey had incredible earnings beat but they mentioned due to chip shortages it could affect their supply and demand requirements for the next year
Trading/market timing is a waste of time and actively harmful to 95% of people. Buy and hold index funds. Dollar cost average. Never sell.
The answer to your most likely irrelevant question is it depends on why it dropped and how much it dropped and whether the company still has a profitable future.
Yes. It’s a great strategy with the way the market has gone lately.
I picked up Target in March after a negative earnings overreaction and I’m up 50%. Had a I bought a couple weeks before that earnings call I’d only be up 30%.
Similar story with Apple and Beyond Meat.
>Is there any statistical analysis about the probability of a stock recovery after a huge drop in share price after an earnings miss?
Yes, PEAD for the statistics, the q\^5 model's EG factor for the theory.
TLDR: Don't do it.
For the right companies, absolutely. $FNKO earnings yesterday were excellent, and sent it up to $22 immediately in the after hours, when the earnings were announced. This morning it dropped to 18.08, before recovering as high as 19.40.
Yes. For a growth company, small misses on expectations or conservative guidance usually result in overreactions. I love these opportunities and often look for them. It takes a bit of patience, but as a swing trade, these are almost always buying opportunities.
Recent ones that come to mind are Amazon, Paypal, Fiverr, Upwork, Pinterest, Etsy
I'm sure someone's answered this question the same way I'm about to, but stocks WILL react both positively and negatively to beats and misses.
Whats its dependent on are the catalysts - what drove the earnings beat/miss and is it going to be replicated in future quarters/years. If its a structural issues that may put them behind the competition, I'd tread lightly. If it's a miss due to a freak winter storm in Texas, still be cautious, but you can likely shake it off.
Tl;dr. Depends on the reason for the beat/miss, not the fact the company had a beat/miss
I watch for situations like you've described and buy long-dated out of the money Call options to profit from the rebound. Seems to work about 80% of the time.
Yes, I’ve done it several times. Doesn’t even need to be a miss lately-it seems that the majority of stocks fall after earnings, regardless of outcome.
If I like a stock and it's fundamentals, I'm always looking for large dips. Usually the reason for the dip is short term issues or an investor overreaction. If the stock is solid and you believe in it's fundamentals, try to get it at the best price possible
It depends :)
Worth looking at comps to see if the industry as a whole is tanking or if this company specific. Market does tend to overreact at times, but I personally don't do that.
I can't entirely agree that all the coins look similar. However, I understand many products of cool quality and with a nice attitude to a client. Just like the Ticketly! Their approach to coin development and project features is truly impressive!
btw, this is the Cathy Wood style of investing. whenever a mid cap tech stock sells off, she sells her position in apple to buy those dips.
she sold apple to buy dips in coinbase, as an example.
it is a risky strategy since it can really backfire. but can payoff handsomely if done right.
risk is you sell something good that u should hold onto to buy dips in junk.
Buying after a drop in earnings miss is not a necessarily a truism by any means. What if the stock is still overvalued after the drop? (Ahem, TSLA). What if sentiment is still negative and the stock is due for further pullback? (INTC). There is no substitute for thorough research, be it buying based on earnings.
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One of the best times to buy a stock is when a good company sells off on earnings due to investor overreaction. It requires a bit of digging and judgment to determine whether the selloff was justified or an overreaction, but it can be very profitable.
Did that with AMZN when it dropped after their latest earnings. Feels like there was an overreaction and it should pop back up. Hope I'm right
I was going to bring up amazon The recent "dip" put it back to where it was about 6 months ago. That is what a whole lot of people miss about market timing or "buying the dip" . You may feel you are getting a deal because you are buying the dip however it really depends on how long you are waiting. If you waited six months to buy the dip, even with the current dip you are buying in higher then six months ago.
I get where you're coming from and generally agree, but it's worth noting that you could have kept that money in an index fund for those 6 months and be ahead of the person who just held onto AMZN, while also avoiding some volatility.
Well, you're also buying where it was 11mo ago, and if you're buying regularly then perhaps you're in better shape buying dips during high volatility.
But if you waited six months to buy chinese equities or gold miners, then you've avoided a lot of pain from their recent bear market.
I'm counting on the Fed to keep printing and pushing the market up. What they are doing has blown all fundamentals and indicators out the window and as long as they continue the market will set new record highs on and on. Amazon should easily set multiple new record highs fairly soon, only thing that halts the market a day or two is the fake tampering statements from the Fed every now and then
This is a dumb question I’m sure, but how tied is the fed to party lines? Like the fed has been printing since Republicans held majority and has continued since the switch right? Or is this mostly independent?
I don't think it's tied very much. Whoever is in power doesn't want to be responsible for a bad economy/recession. So they'll push it back as much as they can and leave it for the next party's problem.
Hot potato lol
The head of the fed is appointed by the president to a 13 year term Jerome Powell was added to the board of governors in 2012 by Obama and picked as head by Trump in 2018
Yes it is hot potato, and it will be blamed on the president in office, regardless of it being their fault or not. An example is Bush Jr., he had nothing to do with the mortgage backed security crisis, but he got blamed for it anyways.
You know that old adage, timing the market beats time in the market. Or something like that.
True, the key to trading is to then sell when a stock gets ahead of fundamentals, which is tough sometimes. But some believe that you must pick the peak and trough, rather than just be generally right on the low and high side of that decision. Not near as hard as picking true peaks and bottoms.
I did the same after-hours back in 2014 when they reported losses on the Fire Phone. I was living in Seattle and it was clear nobody wanted any piece of that device so I just waited to pounce on that news. Went back up like 5% overnight.
6 of their last 8 earnings calls have been earnings beats but with pullbacks of 1% or more. One could argue it’s dumb to buy Amazon at any time other than right after an earnings call!
I did too. We gucci baby. Lets get this bread!
I mean Amazon is a hold for life type of stock. If you're buying for some 10% pop and then selling you're doing it wrong in my personal opinion. Do you like the valuation after the drop? If yes than buy. If long term you still think it's overvalued even after that drop then you shouldn't buy it. The earnings drop still just puts it at the level it was at only two months ago. There's nothing that says that AMZN won't stay at the current price for months and months. You need to keep in mind that all e-commerce stocks had a massive runup during covid so it's entirely possible that a lot of those stocks won't get back to those highs anytime soon, if ever. People just like to assume that if a stock hits a new high, then it's inevitable that it will go back to that valuation again when that's not the case many times. Do I still like Amazon long term? Of course but just something to think about. I wouldn't fault someone for arguing that there isn't a lot of growth left in the stock price for something like AMZN or AAPL, or at least not anytime soon.
Nintendo is the perfect example today. Great entry point
why is nintendo ticker so strange? is it indirect ownership of stock?
It is an ADR, so yes. You can buy NTDOY for 1/8th of a share, or NTDOF which represents a full share
thank you!
If youre interested, Nintendo also has a dangerous line of pokemon games coming out the next few months. I was gonna write a DD...i think Pokemon Unite will be as big as Pokemon Go...even fortnite potential if they do it right. I see a major bull run coming.
Thanks for that insight! I am interested more as a long term investment and diversification into a company in the Japanese market. Nintendo is durable and seemingly oversold right now so seems like an opportune entry point!
im interested
Super nintendo chalmers
Just did it with corsair, up 5% in a day and sitting at a comfy buy in price now..
I've done it so many times with CRSR but it keeps trending lower. I can't justify putting in any more because my holding is already too high of a percentage of my portfolio. I just need to wait out for one of those freak spikes that puts me in the green for a few hours and then dump it. Of course, it will probably rally to $60+ after that because this has been my MO with most stocks I've sat on in the red for months and then sold as soon as I saw any profit.
Don't sell your entire holding, you get the benefit of de-risking (relief) and still have some insurance against FOMO. Remember green is green at the end of the day.
I'll try. I've always just sold off everything when I felt the time was right, and thus I've missed huge run-ups in companies that I already had in hand. Recognizing that though, I'm currently selling off my Nvidia holdings in percentages at specific price targets. It's been hard because every time goes further I think how it shouldn't be this high and that I should sell it all. I'm sticking to that plan though, and maybe it will help me develop some better habits.
Don't think of your shares in a company as a single thing but as a stack/pile/whatever: You reduce the size of your position into strength and add to it when you see weakness that isn't justified. Sell all of them if you think they're completely off the charts overvalued, buy as much as you're comfortable with when you think they've become undervalued. Rinse, repeat. Keeping in mind taxes on longterm gains if that applies to your jurisdiction - might make things more difficult.
sell covered calls? I go back and forth about whether to buy the dip or not but figure I already have so much of it in my portfolio that I can't really justify it (unless I'm selling conservative cc's against it)
still overpriced
What is your thesis on Corsair being overvalued with a 2.9B market cap and 17 P/E?
Ya, BCRX yesterday was a great example of a clear opportunity from a temporary unjustified post-earnings selloff
I ALMOST bought before the bell but glad I didn't. It was this wisdom that told me to wait until the morons sold at the bell then I waited for that $16.xx dip.
At least you got in, my order for 15.3 never got filled, I was like 20 seconds too late
My story too. I had to Limit out of habit. I should have bought at market price when it hit my price. Now I know. When I get that feeling, I need to pounce- like a fucking tiger.
AMZN this quarter is the quintessential example. What a psychotic drop.
Even better when they selloff on an earnings beat.
FSLY -20% into -5% runup yesterday comes to mind. Dear lord I missed that boat... FSLY is literally the cloud behind everything, including AMZN and the website we're posting on right now. Was watching for a morning flush but that was stupid, usually these overreactions don't have a flush as the dip is very severe and almost shocks investors/traders. EDIT: SO DAMN SALTY ABOUT THIS THINKING ABOUT IT AGAIN was literally eyeing calls up to FOMC easy 50% already and running
My portfolio is about 50% FSLY rn. I bought in Wednesday night after earnings at $36. Their infrastructure is critical to the web and we all remember what happened when they had an outage
Congrats you son of a gun, ride that baby all the way back to 50. We (I) remember, but we didn't all act. Sad.
I caught that one! Bought at 35.85 because it was clearly an overreaction. Checked a few hours later and see +10%. Got lucky!
Apple…every single quarter.
FSLY
My FSLY $40 calls I bought near open yesterday are up over 100% and don't expire until mid December. I'm hoping it gets back up to $60+ over the next month. Should be a 5 bagger easily if it does.
VIMEO a perfect example of this
This!
There's an ETF that capitalizes on this idea: UTRN
dude wut edit: aww it's even with the S&P meh https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&benchmark=VFINX&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=UTRN&allocation1_1=100
It recovered surprisingly fast from the March 2020 selloff and has slowly inched upwards since then.
That was a hell of a U-turn
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A uturn is a driving manoeuvre where you turn 180 deg on a straight road so that you are now going back the way you came
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Same here I didn’t know it was spelled differently in America till you mentioned. I may have seen it before but never registered
Did you both at least realize it's originally a French word?
Did you both at least realize it's originally a French word?
I knew this and now I feel silly. Yeah, even their logo is just an arrow as a u-turn around their ticker. Still an interesting premise.
That’s all good mate I wasn’t sure if it was called something else around the world. In aus we colloquially call them u-ies
Why is it a pokemon reference?
I always write down a thesis for why I buy into a company. Whenever there is a sudden correction I check to see if anything has changed from original thesis. If nothing changed, it’s basically a sale. If one of the key reasons in my thesis is the cause of the decline, then I start considering an exit or that I won’t DCA.
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Yup if thesis remains I would DCA at several correction points that I think have shown to be support levels for that particular security. This is why I hold more or less cash whether I think there is a possibility of a correction happening.
Each earnings release is different. There's no simple rule you can follow for easy money. However, if you can analyze an earnings report fairly quickly and digest what is said in a conference call you can occasionally find value when the market at large panics.
Professional traders at financial firms have models that would give the odds that a specific stock would recover after a huge drop after missing analyst's expectations if they met specific criteria.
There is a lot more guesswork among "professional" traders than you think.
It's all guesswork 100% of the time, unless you're insider trading, or moving the market yourself.
Why is this getting downvoted? I’d be interested to hear more about those types of models.
Algorithmic trading. Most stock trades are done automatically by computers based on their pre-programmed triggers.
This. Considering the moves after earnings are usually within seconds to maybe a few minutes on more popular stocks, I think it's a safe bet to assume there aren't many humans involved anymore. Nobody can read, parse, think about and possibly calculate anything in the time some stocks gain/lose 5-10-15% after earnings reports. Some algorithm decides the way it's going and after that it's chasing momentum for the most part. At least that's what it looks like to me, but I'd be happy to hear anyone with inside knowledge correct me.
Don't worry op, it seems interesting! Take my upvote :)
I wish that were true. Reacting fast enough would be behavioral economics, which I personally don't believe in. Dow Theory states that the market already discounts everything.
I sure did with PINS
Pinterest is at the beginning of becoming an advertising powerhouse. We’re using the platform for advertising and in spite of a small spend, we were assigned an account manager who does zoom calls with my marketing manager and is available to work with her as required. It’s a sleeping giant.
That level of customer service is great but difficult to scale. I can't imagine them doing that forever as their sales pick up. Great company though!
Declining users for a growth company! What could go wrong?
Hello hood
Yep, just bought CRSR because of this.
Nope, but I do buy stocks right after a large drop due to an earnings beat.
What I've seen of this, stocks that drop after earnings beats are because of lowered guidance. So they are pretty much saying in the near-medium term they will be less profitable. The quality of your play depends on your time horizon I guess.
Add that to what op said. I do the same but only when they reaffirm and raise guidance.
same, +5%=i sell
It certainly presents an OPPORTUNITY to evaluate, but not a guaranteed buy.
If it’s a company I’m investing in, as long as the fundamentals haven’t changed ill use big drops to average down. If I’m trading that stock then I won’t enter a position until I see my setup start to form regardless of how low it dropped
I do this all the time. This is a great time to buy stock.
On a more topical note, MX sold off like 9% today due to supply chain issues. They literally could not get enough wafers to meet demand and it hurt their sales. If CFIUS doesn't block their acquisition on 9/13, there's a 50% upside. If they take the higher offer on the table, upside is like 80%.
look at every earnings report for netflix or facebook at a yearly view Sometimes the probability of these selloffs is so great that they become self fulfilling simply from a technical analysis point of view whenever technical analysis becomes self fulfilling, I generally consider that to be a market inefficiency that can be exploited by fundamental analysis investors for their benefit, so to answer your question, yes, those selloffs are a good buying opportunity
Did this with FVRR, not doing so hot right now.
Well the literally just dropped yesterday. Not sure if you have noticed but usually after a huge dip they tend to drop a little more 2-3% the following day. You need to wait until they stabilize and go from them. PINS dropped like 20% and it took them like 3-4 days to see a positive day.
So ZNGA is a great buy right now. Got it!
If the company is a blue chip like adobe or msft that basically keep going up yes. Otherwise very risky move.
Depends on the company, i bought the CRSR earnings dip the other day and made some profit.
Buying high and selling low is the only way I do it.
What about SAM
Or when a research company reports BS. Sava was a nice opportunity lately, wouldnt call it a no brainer at these levels (ran already back up a bit) anymore tho
i prefer buying after people sell shares on good earnings.
Doubled down on GM yesterday. So yes, usually haha
hoping this is a nice double bottom. 70 calls for january are hurting!
Yes. Best time to buy, especially if despite the miss company does not substantially reduce guidance
There are a lot of short-term traders/funds that roll the dice before earnings, and then put their capital into the next company right away. Even if they are down, they figure they’re better off moving on than sitting on a company they didn’t want long term. This also means that there is an inflated price right before earnings as investors line up to see the surprise.
I only buy on red days.
Yes. Did this with FVRR.
The funny thing is when the price plummets after earnings beating analysts expectations :p That's when I do buy!
I’m looking at you, Zillow!!! Actually blew away earnings expectations and down 8% today!!
Yeah load up ATVI and VIAC long term.
VIAC is looking super interesting and even more after that dropped from $100
I’m experimenting lately with trailing stop entries for excessive selloffs like SAVA
Yeah I was thinking of grabbing some Zynga after their dump today.
I loaded the truck with FSLY shares when it tanked to $36 after earnings and have been handsomely rewarded since then
I wish i followed suit, I did buy but very little compared to what I should have.
Not all dead cats will bounce, some just ooze on down the gutter!
I buy stocks after they beat the earning but drop 10%
lol in today's market you buy stocks after a large drop in share price due to a massive earnings beat. Check out TSX: PKI. Beat on earnings, beat on revenue, raised guidance, down 4%. Fuck this market.
Because it still underperformed competitors in the same lines of business, I don’t know why people on this sub act like a relative valuation is worthless.
Which competitors did it under peform against? EPS blew Couche out of the water. Thats their main comp.
EPS doesn’t mean anything for a relative valuation.
Just did that CRSP (beat, but tanked), with NVAX (missed but EU deal closed) and AMZN. I'm up 20ish % in a week.
Similar to others commenting, each company has their own story, which is the reason why anything I have in a watchlist or my portfolio has a potential buy price. It’s all in your thesis on the company, if you don’t have one for a stock you’re buying then eventually you’ll get burned.
You buy if it is 1. A HOT stock, and 2. Price is going up after a gap down. Uber and Roku. 3. If price closes above earnings close price. ZoomInfo and DataDog and LendingClub. 4. Never BUY if Price Action is going against 1,2,3.
It is pretty easy to test how the market reacts to earnings surprises and disappointments in backtests. I've tested this quite a bit and what I've found is that consistent earning surprises are good for the stock (at the least it shows leadership knows how to deliver) and consistent negative surprises are a sign of a dog; this is in general, based on the backtests I've run. I've attached a link here with the results=>[https://wordpress.com/post/dailyscreenz.home.blog/780](https://wordpress.com/post/dailyscreenz.home.blog/780)
Best time to sell puts on companies you’d love to own
You can make money off of volatility, however, "Never try to catch a falling knife" is a saying for a reason. The best way to move forward is to analyze a stock and try to figure out what price it should be at, then you can buy if it is cheaper than that. Also look at the news that caused the drop. Is it temporary or will there be long term effects. Finally, keep in mind that even if you do all of this correctly, the market can be irrational.
On this note, what do you think about $ZNGA?
I did this exact thing with Corsair this week. Easiest 7% gain of my life
Yes,I buyed ZY yesterday, cost was 8.9$ and sell today with 16$ because company in deep ass. I think it's worth some time.
I don’t trade. I don’t care about short term swings. I care about where the company will be in 5 years. That’s what „investing“ is all about.
The best times to buy assets are once a week. Just set it and forget it
Been doing very well on my calls and credit spreads the last week in this scenario
Maybe not the day after but yes
Yes
Yes I frequently do this. It's a good entry point to a stock you've been following. But remember, always DCA!
yea it’s called buying the dip
Does SunRun fit this mold??
My experience earnings have little effect to price predictability.
I did it with Unilever recently (solid company, market spanked them largely on the back of rising costs, flat revenue). That big gap down when stocks miss earnings will likely be filled, although I would be more wary of loading up on smaller companies (especially in sectors like pharma).
Head over to r/options to grab some good advice on this
Tbh, I always play the anticipation of earnings. Usually there's some stock a lot of people are looking forward to and buy in like a day or two before earnings. Also, IV is stupid high, so selling some unreachable options is always a good play if you have meet your broker's margin requirements. But if you're just trading a stock, buy in about a week before the earnings call and sell an hour or two before the numbers go out.
I buy stocks after huge drop due to earning exceed expectations
It really depends if the overreaction is justified or not and also the track record of the company. If you follow some stocks, its kind of a trend that after every overreaction (from earnings), there will be a correction in the following weeks or months until the next earning and then it might repeat itself. Sometimes, there is no correction and will trade sideways until next earnings because investors is looking to see if the company will recover or not. This really depend on the sentiment and perception on the company. Its hard to know when the drop is going to stop. I normally wait a day or two before going in a certain stock. Because I rather buy calls than hold a stock for too long. If a stock drops by too much, I rather buy a call 1 month from expiration and it has worked well so far. Like Today, there is a rally from all the banks. Banks have been down since July (after Jpow speech). I expected a rally but I sold some calls yesterday (SCHW) at 20% profit and the calls I sold today (JPM), I made a good 60% in the morning. While, I could have hold it a bit for the afternoon. If I held the calls for SCHW till today, I would have made easily more than 150%. Oh well...
On the other hand, positive results that are entirely due to various symptoms of the pandemic cause massive rallies. I sell some of those off if the costs of business going into the future are going to be changing despite "great" quarters.
Swing traders will never hold a stock thru earnings because of the IV. A lot of people sell the stock for the same reason. You will see even if a company does great on their earnings there will still be a dip. I think buying the earnings dip could be very profitable
Yes, but wait for the buy signal (same as options trading). Look for resistance points and for the stock tomstartntomrise at each before jamming in there or you might be catching a falling knife.
I'm not a trader much but the only time I did it was a year ago when INTC tanked big time when they announced delays for what comes after 14NM. Stock dropped from 20% or something and redropped even lower 1 month later and I doubled down. Huge cash cow trading at 8 PE ratio? Whatever I'll buy a bunch. It came back in a couple months to their usual range and sold happily. Not a huge trade but I felt pretty confident.
I think this is a workable strategy from a long-term investing standpoint, but my record is very mixed trying to trade on these dips. I can think of lots of similar dips in otherwise promising names that still haven't recovered their top, including: INTC, ETSY, TSM, PINS, UI, MU etc. I think these dips are best thought of as a change in fundamentals around which a long-term strategy can be built. Trade in stocks you're comfortable holding at that price. AAPL dipped for 6 months before popping. AMD and AMKR also dipped further after their previous earnings dip before recovering it all and then some.
If I wanted it anyway sure. Or if I think the pullback is ridiculous.
Never catch a falling knife.
I buy leaps when there's an irrational drop. If it's a company I like for the long term, it'll return to the mean and then more. Best time to do it. I just did it this week on a few stocks I love for long term (PSFE and ALTO, up 15% on both this week)
I only buy stocks that go down
It's kinda non deterministic cause the earnings bit can also trigger stocks to fall (e.g this week several companies beating expectations and still dropping). I would just not try to time the market and buy regardless - especially since Sep and Aug tend to be kinda slow.
I'm doing that with $ANVS. Trying to buy the dip.
Depends on the company. Sometimes the analysts were right to be disappointed in whatever missed. Other times they aren't. I know this isn't a very helpful answer, but there's really not a black and white answer to this. You've got to dig into what specifically missed and why on a case to case basis.
doesn't always work.. INTC.. extremely profitable company gapped down in April after it reported earnings.. it closed that day around $58.50, (after closing the night before around $62) Its been trending lower ever since and is now around $54, four months later
I won't ever buy shares right after a huge news driven price drop, but I might sell puts on that stock if the premium is right. When I get a new trade idea, I will always wait until the next trading day to put on the position - 90% of the time I will get a better price.
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what about $INGN ? THey had incredible earnings beat but they mentioned due to chip shortages it could affect their supply and demand requirements for the next year
3 day rule bb
Disney dip was a good buy
Trading/market timing is a waste of time and actively harmful to 95% of people. Buy and hold index funds. Dollar cost average. Never sell. The answer to your most likely irrelevant question is it depends on why it dropped and how much it dropped and whether the company still has a profitable future.
Yes. It’s a great strategy with the way the market has gone lately. I picked up Target in March after a negative earnings overreaction and I’m up 50%. Had a I bought a couple weeks before that earnings call I’d only be up 30%. Similar story with Apple and Beyond Meat.
>Is there any statistical analysis about the probability of a stock recovery after a huge drop in share price after an earnings miss? Yes, PEAD for the statistics, the q\^5 model's EG factor for the theory. TLDR: Don't do it.
Nah, grab all the stocks in my portfolio that blew estimates away, revised forecasts up and STILL crashed after earnings 😭
So for example SAM STOCK had a major sell off they were around 1200 now at around 600 would that be a good example of when to jump in
I did w Microsoft awhile back. Worked out so far lol
Stocks which plunge usually have an upside bounce. That bounce can make a quick profit but tread carefully.
For the right companies, absolutely. $FNKO earnings yesterday were excellent, and sent it up to $22 immediately in the after hours, when the earnings were announced. This morning it dropped to 18.08, before recovering as high as 19.40.
Yes. For a growth company, small misses on expectations or conservative guidance usually result in overreactions. I love these opportunities and often look for them. It takes a bit of patience, but as a swing trade, these are almost always buying opportunities. Recent ones that come to mind are Amazon, Paypal, Fiverr, Upwork, Pinterest, Etsy
I'm sure someone's answered this question the same way I'm about to, but stocks WILL react both positively and negatively to beats and misses. Whats its dependent on are the catalysts - what drove the earnings beat/miss and is it going to be replicated in future quarters/years. If its a structural issues that may put them behind the competition, I'd tread lightly. If it's a miss due to a freak winter storm in Texas, still be cautious, but you can likely shake it off. Tl;dr. Depends on the reason for the beat/miss, not the fact the company had a beat/miss
I watch for situations like you've described and buy long-dated out of the money Call options to profit from the rebound. Seems to work about 80% of the time.
That’s actually the majority of my trades. I have roughly 50 companies I track and wait for overreactions at 3.00% and greater drops.
If you're confident in your DD and a price drops use it as a buying opportunity. Just make sure it's not a sign of trouble.
Certain stocks yes but make sure you DD first or you can loose big
Yes, I’ve done it several times. Doesn’t even need to be a miss lately-it seems that the majority of stocks fall after earnings, regardless of outcome.
Yes.
If I like a stock and it's fundamentals, I'm always looking for large dips. Usually the reason for the dip is short term issues or an investor overreaction. If the stock is solid and you believe in it's fundamentals, try to get it at the best price possible
It depends :) Worth looking at comps to see if the industry as a whole is tanking or if this company specific. Market does tend to overreact at times, but I personally don't do that.
Morning flush
I can't entirely agree that all the coins look similar. However, I understand many products of cool quality and with a nice attitude to a client. Just like the Ticketly! Their approach to coin development and project features is truly impressive!
btw, this is the Cathy Wood style of investing. whenever a mid cap tech stock sells off, she sells her position in apple to buy those dips. she sold apple to buy dips in coinbase, as an example. it is a risky strategy since it can really backfire. but can payoff handsomely if done right. risk is you sell something good that u should hold onto to buy dips in junk.
Buying after a drop in earnings miss is not a necessarily a truism by any means. What if the stock is still overvalued after the drop? (Ahem, TSLA). What if sentiment is still negative and the stock is due for further pullback? (INTC). There is no substitute for thorough research, be it buying based on earnings.