It’s been an interesting week for stocks. The markets are primarily down from the beginning of the week for both the NASDAQ and the DOW. American business looks strong at the moment with the country adding more jobs to the economy but with markets possibly getting ready for earnings reports.
Earnings reports are fickle beasts to try and decipher, even when a company beats estimates it does not necessarily mean that the news will be reflected in positive swing in the stock price. Expectations run high for companies that have higher financial goals set for them, while companies that are not expected to post positive financial results often fair better in stock price, as it was unexpected for them to post anything positive at all.
It’s important for to do the research on the companies that you follow and understand that both positive and negative financial news may be advantageous depending on your position in the stock. Are you long or short and what expectations do you have.
For example, buying stock in a company that was anticipated to post a profit but instead posts a loss may signal a buying opportunity if you understand why the company lost money to begin with. The next quarterly earnings report may allow you to make more money if the company can recover and post a profit in the next quarter.
Exceeding expectations is where the money is made, falling short on expectations is a possible opportunity to buy.