Question: Is it impossible to make a profit by buying stock on the news of pre-market earnings reports?

Morgan Stanley and Bank of America both delivered higher-than-expected earnings reports pre-market...........

so they went up about 5% pre-market...........
(when you couldn't buy it because the market had not opened yet)......

and as soon as the market opened, they plummeted down 1%.


Is that how stocks usually behave when positive pre-market earnings reports come out?

Answer:

Yes.... and no.

Pre market is usually less liquid than normal trading hours. So the short answer is... sometimes stocks drop from pre-market.... sometimes they don't. Many traders won't trade for the first 30 minutes of the normal trading day.... in fact some don't during the first hour... they call it "amateur hour".

You can't make money by buying anything. The only way to make money is by selling it.

In order to succeed in the stock market, you need to know two things. First is news. Like the earnings reports before the general public knows about it (but beware that if you can find out about it, others can do. It must be some information that only a few would know about). Second is reaction. You must know how the market will react to the news once it breaks. For instance like the example you provided. Just because you know the earnings report pre market, doesn't mean the market will open positively. If you know these two factors, you will be a very rich person.

Of course, it is impossible to know how the public will react (although you can make good guesses, but cannot be 100% sure). And it is very difficult to get the information or news before everyone else does (thats why inside trading is illegal).