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Author: rughetta Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2385  
Subject: Scary Observation Date: 2/10/2006 1:44 PM
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Did anyone else notice the drop in share price in the few hours just preceding the earnings press release and conference call? I noticed a similar phenomenon just prior to the earnings press releases for Whole Foods (WFMI) and J2 Global Communications (JCOM). Adding fuel to the fire, I also saw a rise in share price for Corporate Executive Board (EXBD) just prior to its very positive earnings press release. I saw QSII dropping through part of the day and wondered if I should sell and re-enter after the carnage but I resisted the temptation because I wasn't sure if the move meant anything (I would have kicked myself if I was not invested if positive earnings were reported). Point is, was the price drop due to prior knowledge of an earnings miss or was it due to a jittery market that flushes when you say BOO!? It seems too coincidental that price drops preceding three earnings misses and a price rise preceding a positive earnings report could be just due to speculation. Statistically, that situation should have a 0.0625 chance of occurring randomly (0.5^4 = 0.0625). Is there a lot of "insider" trading prior to an earnings report and should we heed those signals to avoid a drubbing?

I don't intend to act on any pre earnings release movements, yet, but I just want to get others' opinions regarding this observation.

CAVU,

Rughetta
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