Have ever found yourself disappointed over some company results that should have moved the stock far more than it did? Or how devastating was it to find your company’s stock moving sharply lower after doing everything right – beating earnings and raising guidance? It can be quite frustrating and maddening. Why doesn’t the stock or the market do what it is ‘supposed to do’, when I want it to happen?
The stock market is set up to make the most people look foolish at all times, and if you fall into the ‘surprised’ or shocked category then you’re not alone. But if you step back a moment and understand how big money – the 80% or so of the market liquidity – acts and proceeds then you might create an edge for yourself.
Big money does NOT flow all at once. Think about it: if you wanted to buy into some stocks and take a large position, would you do it all at once? Further, if there is ‘hot money’ already in the name that is going to flee quickly, wouldn’t you wait until that activity has concluded? Of course you would.
So, when a stock drops modestly or swoons post earnings – like a Gilead, Apple or Skyworks Solutions after posting a great number, don’t be so sure the stock you owned is destined for the round file. If you wait it out and watch the action, if constructive – you may soon be joining the big money with a nice winner on your hands.
