"Buy the rumor, sell the news." A phrase that has echoed through the halls of Wall Street for generations. It's a dance between anticipation and realization, a phenomenon that has both baffled and fascinated market watchers. And it's a phenomenon that we at LikeFolio predicted would unfold with Nvidia (NVDA), even as the company posted incredible results and guidance.
The Prediction That Came True
On Monday we warned investors that even blowout earnings for Nvidia (NVDA) could spark a tech selloff due to the “Buy the rumor, sell the news” phenomenon.
We analyzed the market psychology, the soaring stock price, the high expectations, and the potential risks.
And then it happened.
On Thursday, even with NVDA's incredible results and an initially bullish reaction across the tech sector, the stock plummeted through the day from its opening highs and ended the day basically flat.
All while the rest of the semiconductor and tech sectors tanked, leading to a one-day decline of over 2% in the Nasdaq.
They “sold the news.”
The market had priced in the anticipated good news, and once it was released, there was no new catalyst to push the price further.
The overhyped news led to profit-taking, and the short-term traders sold immediately afterward.
A Pivotal Moment for Stocks
This is not just a one-off event.
This big reversal after such an incredible earnings report could signal a significant short-term correction, especially in tech and semiconductors.
The market is volatile, and the uncertainty is high. But let's not panic.
Let's see this as an opportunity.
A Huge Opportunity Ahead
If and when this correction occurs, it will be a massive opportunity.
Sometimes, we hate being right. But in the world of investing, being right means being prepared.
It means understanding the market, following the data, and making informed decisions.
At LikeFolio, we will be monitoring consumer behavior on Main Street and alerting members to the next big winners on Wall Street.