Navigating the stock market often involves deciphering the complex dance between investor expectations and actual performance. Even when companies like SoFi Technologies, Inc. (NASDAQ:SOFI) deliver impressive earnings, their stock can still experience a downturn, leaving many puzzled by the disconnect.
- SOFI stock is tumbling in today’s session. See the chart here.
Shares of SoFi are trading lower on Wednesday. Sometimes, there is good news on a company, and yet the stock heads South. ‘Buy on the rumor, sell on the news' is an old expression that refers to situations like this. This is why we’ve made it our Stock of the Day.
Some traders and investors tend to overanalyze things. They believe there is a direct correlation between a company's fundamentals and its trading action.
This is wrong.
Most trading in the market is done by day traders, swing traders, and high-frequency traders. These are all short-term strategies. These traders don't care about fundamentals or where the stock will be in 3 years.
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They care about where it will be in days, hours, or even minutes.
The stock market moves in response to changes in supply and demand. If there is more demand from buyers than there is supply from sellers, buyers will be forced to outbid each other to acquire shares. This will force the market into an uptrend.
If there is more supply from sellers than demand from buyers, sellers will be forced to undercut each other to have their orders executed. This will cause the stock to enter a downtrend.
The reason SoFi is trading lower despite blowout earnings is that the market ran out of demand.
It was widely anticipated that the earnings would be strong. People perceived this as a potential catalyst that could push the price higher. As a result, those who wanted to buy shares did so before the earnings were released.
So, when the news came out, the market was effectively out of buyers. And a market with no buyers can only go down.
SOFI Price Action: SoFi Technologies shares were down 3.30% at $21.66 at the time of publication on Wednesday, according to Benzinga Pro data.
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