Why Stock Prices Decline After Positive Results ?

There was a rally in HDFC Bank Shares from 1370 to 1460 few days before the positive results were announced. (refer screenshot)

After the positive results are announced the stock goes into sell off.

Thoughts Please?

Book Value of this stock is 450/-. Altman Z score is 0.615. Piotroski F score is 4. So it should be mulled over why it rallied from 1370 to 1460, to start with.

When people buy on expectation, logic shouldn’t be expected. :grin:

Big people already know the result is going to be good so they already start buying position few days ago, when good result is announced they start selling, and guess who buys them? That’s right retail investors.

I learnt this from power of stocks, if you want i can share the video :sunflower:


One reason is, sometimes there is an anticipation of better results than they actually are, because of the management’s commentary or because of competition’s results, and if the results don’t match the expectation price falls.

Another reason is, traders create positions expecting results, this could happen days prior or even weeks prior, and the positions are sold for profit or even for a loss.

Another reasons is, even investors can take a position, and if they are disappointed with the results, even if the results are good, the investors may not want to increase their position and think that the price will fall in the coming weeks, so they sell their positions, in the expectation of buying at less later.

There could be many such possible reasons.

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A 6.5% rise is not a rally. It could even be called as small depending on the stock.

Also, these scores are not absolute, although these can be considered, many investors consider valuation and return metrics.

Price action never waits for good or bad news or results. It follows its own footprints. Most of us get trapped by the manipulation of good news .

Yes it does not wait, it happens before, but fundamental reasons are what drive prices up or down. So traders and investors have different points of view and different plans.

Apart from the points others have mentioned, one more point. Management commentry/guidance
Even if the results are positive but management says they expect performance to worsen in future, stock falls and vice versa.
But that also depend on how much does the market trusts the management

Share the video.

Yes Sure please share the video

@GB26 @Kanuj5678

Videos :innocent:-

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A trader can track news to stay aware and conscious about the psychology but to take trade , there must be any signal on chart. Fundamentals can be an edge for investment purpose but surely not for trading .

Trading is a broad term, one can trade purely based on technicals, and one can even trade based on fundamentals alone if he is knowledgeable about the sector, industry or the stock, and then there is a technofunda approach which combines both technicals and fundamentals, which is the best but hard to do.

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Ya obviously , It’s totally on individual .

Actually, when a stock performs well in the market, many traders begin to keep an eye on it and look for ways to profit from it. This current wave is sufficient to turn the market in another direction.