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Wild stock market action on earnings shouldn't happen!

Tech company Nvidia NVDA surged over 15% February 22nd 2024 following the release of earnings. NVDA received a lot of attention for its stock market achievements but it wasn't alone. Wild price swings on earnings was a daily event through earnings season, some with big gains others with huge losses. On Feb. 29th OKTA, BYND, AI, CELH, PSTG and MEG all bolted higher by as much as 20%. Others weren't so fortunate as their stock prices saw massive losses on heavy selling by mutual and pension fund managers.

It's great news for accounts holding big winners but what about the extreme earnings casualties?

Random unpredictable action is an issue with navigating the stock market. While NVDA surged on earnings another tech industry leading stock Pan Alto Networks PANW plunged 28%. For those that recognize technical signals in the stock market it was just a few days earlier tech stocks, as a group, triggered sell signals. So how would you have known to hold NVDA but sell PANW?

After the internet bubble of the late 90's burst security regulators charged several organizations and individuals with criminal charges under existing security laws. Martha Stewart was one of them, eventually spending four months in jail. In the early 2000's a number of new laws were set in motion effectively blocking leaks on earnings between public earnings release dates. That seemed like good news at the time, but was it?

The underlying premise of public markets security legislation is transparency and disclosure. But ask yourself this question how do the laws serve the public when mutual fund and pension fund managers move stocks by extreme amounts immediately following earnings results and less so the rest of the time? How does the average person know where to position capital with the obvious unpredictable uncertainty that shows up every three months? 

This shouldn't happen!

The truth is it would be easier to recognize trends and make more timely buy and sell investment decisions if the stock price moved more gradually day after day based on what is being learned by all investors. Early birds would be rewarded!

The intent of security legislation in the public markets is to provide transparency and disclosure but the process isn't efficient. Private company investors can potentially know more about the company they invest in by doing their homework and getting the relevant information whenever they want it, but not in the stock market.

The earnings season is an investment environment that is far too speculative for intelligent successful investing. The crypto markets don't suffer the same fate.


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