Yahoo!… Not

Here’s an excellent example of the reckless buying I was talking about yesterday. Yahoo! was being bought like mad going into tonight’s earnings report. This stock has risen over 80% since its March bottom. Yet people felt the need to push it even higher just before the earnings report. Well, they met the estimates, and even raised their guidance for future quarters. The only problem is with a run like that great expectations were built in to the stock price. Here’s what happened after the news, on an hourly chart:

A very quick drop of more than 6%. This may give us an idea of how earnings season will go. Given the rise in stocks, if a company doesn’t beat expectations expect the stock to take a hit. Of course all of this could reverse tomorrow once the analysts make their comments. In that case… never mind! I’m not saying dump your stocks, but initiating positions just ahead of earnings is not prudent, IMO.