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If an earning report is really good. However it is released the previous day, during after hours trading time. Will it still potentially impact the day? I ask this because I assume that the stock price would have sorted itself out during after market because it can still be traded. Therefore it may be the impact of the news will be less if any the next day. Do the pre-markets also adjust the stock price according to the new news the night before(after trading hours).

The other questions would be. If an earning report is released after "after hour" trading hours. That means the price of the stock is unable to react to the news. So does the price react to the news the next day? In this case would all the price action happen in the pre-market?

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Your questions are a bit contradictory. In question one, you stated that you "assume that the stock price would have sorted itself out during after market because it can still be traded" but in question two, you stated that "the price of the stock is unable to react to the news" if the earning report is released after hour trading hours." Edit or clarify if you wish but until then, here's my best guess at what you're asking.

Earnings announcements for major stocks are actively followed and traded heavily. The vast majority occur in the pre and after market. The more impactful the news, the greater the reaction, up or down. The impact is not just about the earnings (meet, beat of fall short) but other metrics as well (revenues, same store sales, whatever). Another important one is 'forward guidance' which often comes to light during the conference call (which many traders listen to), if there is one. That can mean a delayed reaction after the initial EA release. I have seen many EAs where upon good news, the stock zooms up immediately and by the open of regular trading, price has reversed, gains are gone and sometimes, the stock is now down from the previous close.

When the U.S. market closes at 4 PM EST, the majority of investors and traders head off into the sunset. The number interested in in the EA, though sizable, is greatly reduced. As more and more people log onto their brokerage platforms in the morning in preparation for the new day, EA news will also be processed and possibly reacted to, resulting in a secondary bump or drop.

Any of this can occur during after hours and/or during the pre market and there may or may not be continuation or reversal during regular trading hours. There is no way to predict or know what will happen. The best suggestion that I can offer is that if you're going to attempt trading EAs along with your desire to trade FDA releases (your Novartis post) that you wait until you have some seasoning at this because the volatility in the pre and post market can be treacherous and you have to be disciplined and react quickly.

And just as a side bar, pre and post market trading is very useful for investors with a target price for purchase or sale as well as for locking in gains for those who dabble in long options. For most people, it should be avoided.

  • My questions are contradictory because I'm still trying to get a feel for it. I'm new, I have only paper traded for one week. It went well. But I have heard of beginners luck and how it comes back to bite you on the ass. Your guidance has been a big help with clarifying some of the questions I've had. – Mr Gibbous May 13 '18 at 22:07
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    @Mr Gibbous - Don't get too enamored with paper trading results. While it's beneficial for learning a broker's platform, there is no emotional involvement. Trading involves decisions based on greed and fear. Being riskless. paper trading allows you to hold losing a position far longer than you would if you had hard earned real money was disappearing from your account by the minute. Many simulators fail to account for frictional costs, inflating gains. It has value but it's not the same thing as being live, in real time. – Bob Baerker May 14 '18 at 14:09
  • I have started trading with a small amount. I traded NVS yesterday and lost 9 cents. At the same time I was trading HQCL and made 41 cents. Your advice about how larger pharma companies are not as effected as smaller companies seems to be spot on. – Mr Gibbous May 15 '18 at 10:56
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    Congrats on netting 32 cents... And I have another two cents for you (g). Make sure that you focus on position size as well as your risk management. AFAIC, they're more important than your entry. If you don't, you'll end up among the 90% or so of day traders who lose money. Good luck. – Bob Baerker May 15 '18 at 12:05
  • By position size, are you referring to making smaller trades to help manage risk? – Mr Gibbous May 15 '18 at 12:36
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Aside from dividends and splits, a stock's price changes for one big reason: people trading the stock value it differently now. To that end, every piece of information can affect it -- even information that probably shouldn't. The price could dip on news that the CEO caught a cold, if news outlets were desperate enough to report it. Markets are made of people, and people can be quite irrational.

Time does tend to have a calming effect; news of a cold is likely to be rejected the next day as the sensationalism it is. But if the news is significant and related to the company's profitability, it can affect the price for days, weeks, even years in extreme cases. (Past a certain point, though, one could argue over whether the effect is due to what was reported, or what happened.)

  • The "CEO caught a cold" isn't sensationalism. It's merely mundane information. I'll take that as a tongue in cheek comment but if you change that to the CEO contracting a life threatening disease or meeting an untimely demise then you might have something for investors to react to. – Bob Baerker May 13 '18 at 13:55
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    It's slightly tongue-in-cheek. But lots of info that sounds vaguely relevant, and is even reported as if it's Real News, has no actual bearing on the company's profitability...of course it can still affect a stock's price when the gamblers overreact. – cHao May 13 '18 at 14:34
  • LOL. Believe it if you want but no trader reacts to "the CEO caught a cold" or such trivial info. Since you label them as gamblers, I suspect that you are on the outside looking in and that you have never traded. – Bob Baerker May 13 '18 at 14:37
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    I label them as gamblers because that's how they act. There are investors, there are speculators, and there are gamblers. You might group the last two together, but "speculator" doesn't properly convey the superstitious skittishness that seems to underlie the gamblers' every move. – cHao May 13 '18 at 14:47
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    Re "...every piece of information can affect it...", there's also no guarantee that any particular information actually DID affect it. E.g. the market commentators claiming that the market rose/fell because of particular news items are just guessing :-) – jamesqf May 13 '18 at 17:46

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