How do prices behave before earnings announcement?

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Old Mar 22, 2012, 7:21pm   #1
Joined Sep 2008
How do prices behave before earnings announcement?

Hi everyone,

I would like to know if prices have a certain way of behaving depending on the earnings announcement, for instance if on the previous days price raises means that earnings are going to be better than expected? Or what happens if prices are flat?.
Basically I would like to know if there is any way to know by some indication how is going to be the earnings release?

Thanks
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Old May 7, 2012, 10:12pm   #2
 
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Re: How do prices behave before earnings announcement?

Every time is different. If you are looking at studies over thousands of trades based on prior closing prices I don't know if everyone has done it. I read a very interesting study of Friday closing prices and Monday opens. However, that doesn't mean anything on an individual trade, just what to expect over time over a large sample
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Old May 7, 2012, 10:30pm   #3
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Re: How do prices behave before earnings announcement?

Price behviour pre-earnings is not a reliable indicator but I did some work on price behaviour post-release across the FTSE350 some years back - there was a small excess of price performance in the direction indicated by the price movement on the day of the release, up or down, compared to the previous session's close, over 3 days. So it would be possible for example to go long if the price on release day ended higher than the previous day's close, using the previous day's close as the stop. It works quite often, but over such a short period the reward did not really justify the risk. Over a longer period, the release date tended to be less significant. I have seen a Sandy Jadeja video in on the web which he explains the same strategy.
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Old May 8, 2012, 9:59am   #4
 
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Re: How do prices behave before earnings announcement?

Quote:
Originally Posted by Fran8 View Post
Hi everyone,

I would like to know if prices have a certain way of behaving depending on the earnings announcement, for instance if on the previous days price raises means that earnings are going to be better than expected? Or what happens if prices are flat?.
Basically I would like to know if there is any way to know by some indication how is going to be the earnings release?

Thanks
Hi Fran,
Not that i did an exhaustive study on the matter,or anything, but by looking at the charts for quite long time now, I very very often see that if price goes one direction with a bit of momentum hours or minutes before any news release, there is huge probability to just go the other way around when the figure is out ....
Also there are some certain pairs that almost always makes a quite sizable move on the exact moment of announcement itself, and always get faded the other way even harder.....
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Old May 8, 2012, 10:03am   #5
 
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Re: How do prices behave before earnings announcement?

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Originally Posted by Fran8 View Post
Basically I would like to know if there is any way to know by some indication how is going to be the earnings release?

Thanks
btw.... i think the releases numbers themselves are not that important if they are not deviated BIG time from the expected figure....
the important thing is how big traders interpret them, and/or how they use them as an excuse to shake the market....
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Old May 8, 2012, 1:50pm   #6
Joined Sep 2008
Re: How do prices behave before earnings announcement?

Fran8 started this thread
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Originally Posted by Enzzo View Post
Hi Fran,
Not that i did an exhaustive study on the matter,or anything, but by looking at the charts for quite long time now, I very very often see that if price goes one direction with a bit of momentum hours or minutes before any news release, there is huge probability to just go the other way around when the figure is out ....
Also there are some certain pairs that almost always makes a quite sizable move on the exact moment of announcement itself, and always get faded the other way even harder.....
That has been what I have been seeing a lot. I have see also stocks going up on the previous days and even if they beat estimates they go down because it was already spected. I found traiding earnings a bit complicated after all
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Old May 8, 2012, 2:03pm   #7
 
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Re: How do prices behave before earnings announcement?

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Originally Posted by Fran8 View Post
That has been what I have been seeing a lot. I have see also stocks going up on the previous days and even if they beat estimates they go down because it was already spected. I found traiding earnings a bit complicated after all
that's the famous quote: "buy the rumor, sell the fact"..... or "sell the rumor, buy the fact"...lol
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