Editor's note: Ask TheStreet is designed to answer questions about the market, terms, strategies and investment methods. Please email us to ask a question, but keep in mind that we cannot offer specific investment- or stock-related advice.


A stock I own reported great earnings this morning, but the price hasn't really gone up. After the stock's recent run-up, I assume this is due to some profit-taking. Any thoughts on this scenario?

-- Submitted via Stockpickr Answers

It's hard to make short term assumptions about a stock. Stocks move up and down on any given day for countless reasons. And they usually move the most -- or at least attract the most volume and attention -- when the company announces their quarterly earnings report because that's when they have the eyes of the investing world upon them.

GM ( GM), for example, recently announced a first quarter (2008) loss amounting to $5.74 per share, reflecting $2.9 billion in one-time charges. Seems like a loss that big that would be bad news and send the stock plummeting, right? Wrong. Investors sent GM's shares up 9.4% that day because without the one-time charges, GM only lost $350 million (or 62 cents per share), handily beating Wall Street's expectations.

So, as Chuck Berry said, "It goes to show you never can tell."

GM's "one-time items" included a $1.45 billion charge to reflect a change in the value of GM's 49% share in GMAC Financial Services. Ray Young, GM's executive vice president and chief financial officer, said the company revalued its stake because of losses in GMAC's residential mortgage division.

After a company announces earnings, the "Monday morning quarterbacking" begins. It's easy for analysts , traders, talking heads and the like to come up with reasons for a stock's short term move "ex post facto."

For many individual investors, it's comforting to have a reason -- any reason -- as to why a stock moved one way or another in the past. But what you need to understand is how it will move in the future, right?

Here's what happens. If a company announces great earnings and the stock goes down, the so-called "market" may be "saying" that it does not like the company's guidance for the next quarter -- or next year. The market "commentators" may also attribute the drop in the stock -- after what seems like good news -- to be a result of profit-taking.

It's best to avoid that game entirely and think long term.

Some of the things that move stocks on any given day: analyst opinions (yes, they still matter), short covering, earnings, rumors and other news. And of course, stocks move with the broader market every day like a toy sailboat caught in the tide.

Don't chase that boat -- let's call it the good ship "Momentum" -- too far into the ocean and get caught in the undertow.
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.

If you liked this article you might like

How 1-800-Flowers Preps for Valentine's Day Crush

How 1-800-Flowers Preps for Valentine's Day Crush

Forget Gold and Platinum! Give Your Sweetie Iridium this Valentine's Day

Forget Gold and Platinum! Give Your Sweetie Iridium this Valentine's Day

News Corp. Beats on Bottom Line Despite Sluggish Ad Sales

News Corp. Beats on Bottom Line Despite Sluggish Ad Sales

Nvidia Q4 Beats Street on Top and Bottom Lines

Nvidia Q4 Beats Street on Top and Bottom Lines

Coca-Cola: We'd Like the World to Buy a Coke Zero -- or a Smartwater!

Coca-Cola: We'd Like the World to Buy a Coke Zero -- or a Smartwater!