when a company announces favorable earnings for the quarter short term traders may buy the stock at the open to capitalize on the run up while long term investors may add the stock to their existing positions weak longs will hold the stock until it begins to consolidate following an earnings run up selling the stock and moving on to other opportunities long term investors will continue holding the stock 
long term investors may take advantage of the consolidation to add to their position and lower their cost basis long term investors may wait on the sidelines following a positive earnings announcement and buy the stock after it begins to move lower and consolidate this allows them to buy the stock at a lower price and ultimately increase their long term profit potential investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 