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Why do shares drop on good earnings ?


Jayjay

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I am following Bohoo and ther shares have been climbing what I want to know is why do the shares drop when the company has just posted double growth over the year profits beat the predicted forecast

Can any one explain this .is it people taking profit now ? You would think that they would go up not down

When the company raised its forecast during the year the shares rose but yet when the actual figures come out and are better than expected they drop

Very confusing .

I am new to this and any info would help

I have also seen this happen with other companies I watch

 

Thanks Jay

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Guest GaryB

Consider the different reasons the share might be held, from the day trader simply holding a momentum move or the longer term investor holding for year on year growth.

With the monumental amout of information available including ongoing investment analysis provided by the broker research and other specialised research houses, there is more than enough current information about companies earnings and expected earnings.

When theses numbers are confirmed in line with a consensus of research there are no surprises and the shorter term trader investor would be looking to take profits and look for other opportunities. This is shown in the day to day movements.

For the longer term holder, the day to day movements are just noise and often disregarded.

The longer term holder is interested in the forward looking commentary from the compaies reporting, should this be positive generally the share price will recover quickly from the short term profit takers as the dip offers a buying opportunity. The longer term ( weekly) trend will remain in tact. However at times forward commentary from the company report can have an immediate negative effect on share prices and price trends can change. The first to sell may be the institutional end of the market as they will sell into strength to get the liquidity required for the volume to be liquidated.
Define where you fit in to this equation and the sell off on the company reporting may present an opportunity increase your position or take profits.
 

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