Price action leading into company report

[skc]

There was a short discussion over here about share price action before company reporting...

https://www.aussiestockforums.com/f...t=18189&page=5&p=790878&viewfull=1#post790878

The question is - does the collective wisdom of the market, on balance, accurately pre-empt the upcoming report?

Here's an interesting exercise by CBA



http://www.afr.com/p/blogs/markets_today/level_of_downgrades_doesn_give_cba_irYhVvNXQH767RTlRbr5DM

Share and discuss your thoughts, experiences, charts and questions!

 

[Gringotts Bank]

That tells me to buy stocks that are down before reporting and vice versa. Nothing in the upper right and lower left quadrants. But they needed to look at more stocks I reckon.

 

[craft]

There was a short discussion over here about share price action before company reporting...

https://www.aussiestockforums.com/f...t=18189&page=5&p=790878&viewfull=1#post790878

The question is - does the collective wisdom of the market, on balance, accurately pre-empt the upcoming report?

Here's an interesting exercise by CBA

View attachment 54229

http://www.afr.com/p/blogs/markets_today/level_of_downgrades_doesn_give_cba_irYhVvNXQH767RTlRbr5DM

Share and discuss your thoughts, experiences, charts and questions!

The companies on the chart are the ones showing a major change in direction.

Seems to indicate the ones not showing a change in direction haven’t been charted. If that’s the case it’s a pretty meaningless chart other than to show that sometimes the market gets its anticipation wrong. To draw any conclusion about the ‘extent’ would require all data points plotted.

Short term earnings surprises don’t have much impact on me so I don’t have much of an opinion on their regularity. Gut feel = Random, unlikely place to find a robust statistical edge. Earnings surprises arising from just one annual result which are big enough to impact the long term picture are rare unless you have missed a lot of prior tell tales.

In the majority of cases the upcoming results are evident in the price action way before the masses are informed.

The part of boggo’s statement that I don’t understand is not so much to do with earnings suprise or lack of suprise, but the bolded bit. Why does this uniformed mass sit ideally by and allow a select ‘inside/smart’ minority set the price correctly? Is he only referring to masses that aren’t involved in the stock? Mass by number but not by transaction power.

 

[skc]

Seems to indicate the ones not showing a change in direction haven’t been charted. If that’s the case it’s a pretty meaningless chart other than to show that sometimes the market gets its anticipation wrong. To draw any conclusion about the ‘extent’ would require all data points plotted.

Lol. I missed that statement about "only charting those that have major change in direction".

Basically the exercise filtered stocks that fit in the top left and lower right quadrants, and the AFR guy proceed to note the absence of data points on the opposing quadrants. If I find the time I might make an attemtp to plot all data points.

Furthermore, the correct way of interpreting the chart is probably not by quadrant... if a stock has run 25% leading into the result, and falls 5% after the result... I'd say the market priced the result pretty good. Yes it ran a bit too far ahead, but the market basically came from 20% too low and corrected itself to be 5% too high.

So the "priced in" zone imo should be something like this...

 

[Boggo]

The part of boggo’s statement that I don’t understand is not so much to do with earnings suprise or lack of suprise, but the bolded bit. Why does this uniformed mass sit ideally by and allow a select ‘inside/smart’ minority set the price correctly? Is he only referring to masses that aren’t involved in the stock? Mass by number but not by transaction power.

What I am referring to are the majority who are sitting on the sidelines waiting for the news to actually come out, or in some cases waiting even longer until the so called experts have analysed the numbers and made their recommendations before they act, be it buy, sell or hold.

In most (not all I will agree) cases there is enough evidence in the price action to provide a heads up of what is coming and the 'inside/smart' as you call them minority can detect the change.

How many of the "uninformed mass" will wait until the fundamental numbers are all crunched and broadcast prior to making a decision on a stock, but will look at a technical analysis opinion of tomorrow's weather on tonight's news so they can decide what to wear tomorrow.

My

 

[skc]

There you have it...



Interesting to note:

- Total data points = 148 (I took ASX200 list and took out those that didn't report within the time frame)
- Starting date = 15 July, ending date 2 Sept.
- There are probably error in there as some company reporting dates might be wrong.
- Of all 148 data points - 113 (76%) experienced <5% movement post report. One can probably make the case that the market got these pretty right.

I am sure there are heaps to other analyses that can be done on these... but I will have to do these a bit later.

 

[tinhat]

There you have it...

View attachment 54232

Interesting to note:

- Total data points = 148 (I took ASX200 list and took out those that didn't report within the time frame)
- Starting date = 15 July, ending date 2 Sept.
- There are probably error in there as some company reporting dates might be wrong.
- Of all 148 data points - 113 (76%) experienced <5% movement post report. One can probably make the case that the market got these pretty right.

I am sure there are heaps to other analyses that can be done on these... but I will have to do these a bit later.

So many ways you could write a narrative to fit those results. One would be that this reporting season has not revealed too many surprises and that guidance has generally been met in most cases.

Another observation would be that many of the stocks on the right hand side of the graph have been in upswing - there are quite a few gold miners and mining services companies in that area of the graph. With the gold miners, to what degree are those outcomes just a function of the current upswing in the price of gold? With the mining services companies their share prices have reflected (over-reactions to) forward earnings projections and uncertainty more than anything else. Both gold miners and mining services had mid-year crashes which they are recovering from now.

Wow, just had a look at the DMP weekly chart over the past 18 months. That stock has consistently thrown up trading opportunities over that time (swinging between oversold and overbought).

Thanks for compiling that data.