January 30, 2014 (Chinavestor) We love the earnings season. This is when we get to know how companies actually did versus pre-announcements and such. No more public stunts, just the numbers. Additionally, this is when investors can get the most out of the best trading stocks. Take a look at Microsoft (NASDAQ:MSFT), IBM (NYSE:IBM), Ford Motor Co. (NYSE:F), or The Dow Chemical Co (NYSE:DOW) for example. These stocks jumped or declined significantly after revealing quarterly financials. And now we have Facebook (NASDAQ:FB) to join the party.
We all know there is no easy money on Wall Street. And Facebook's recent surge demonstrates this again. I say this despite a seemingly easy money after a 14.58% surge in the first half hours of trading today. As always, devil is in the details.
Facebook Inc. (NASDAQ:FB) after earnings announcement, January 29-30, 2014
For the record. Facebook Inc. (NASDAQ:FB) closed at $53.53 on January 29, Wednesday @ 4:00 P.M. Then it immediately jumped following earnings announcement during post-market trading hours. As a matter of fact Facebook Inc. (NASDAQ:FB) ended the day at $60.01 as late as 8:00 P.M. Electronic trading allowed Facebook to open as early as 4:00 A.M. and the stock price climbed to as high as $63.84 before coming back to $62.12 by 9:30 A.M. In other words the stock added $2.12 during pre-market trading hours on top of a $6.47 gain late afternoon the previous day. All told, stock price of Facebook Inc. (NASDAQ:FB) rose $8.59 or 16.07% during extended trading hours. So it came as a little surprise to us that Facebook (NASDAQ:FB) is actually DOWN from the open price of $62.12 right now.
Simply put, all of the gains that were there to reap were gone by the time the stock opened at 9:30 A.M.
While this may seem like a common sense approach, many traders are still not using it. Too much gain during post- and pre-market trading hours results in a stock price decline from the open. And if you think this may be a one time occurrence or a Facebook (NASDAQ:FB) specific trading characteristic, think twice. Take a look at liquid, good trading stocks like Apple Inc. (NASDAQ:AAPL), Cisco (NASDAQ:CSCO) or Intel (NASDAQ:INTC). When these companies announced better than expected results, most if not all the gains were recognized during post- and pre-market trading hours.