Posted by forex at 1:29 AM
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1. Research whether the news is old. Many companies release old news in order to achieve a higher price pre-share. Despite the fact the press release is old, the security still reacts the same in most cases. If the press release is old news, find the date the last time the press release was announced. Next, find a chart of the which includes the corresponding time frame, and evaluate how the stock reacted to the news. If the stock surged, the security more than likely is going to increase in price per share. On the other hand if the press release caused the stock to drop last time, the security may decrease in price per share again.
2. Determine the strength of the news. Stocks may decrease or increase in price per share quite suddenly. Thus, when trading news, it's best to avoid these price swings through trading in the morning and afternoon. If the news is strong, then the security often reacts in a similar fashion the following morning. For example, if a small company released a deal with a large multinational company, and the stock increased 30 percent in price per share within 30 minutes of the market opening. The following day, the stock may increase 10 percent within the first 30 minutes of the trading day. Many day traders buy or short securities within minutes of the market closing and sell within minutes of the market opening to create small, daily profits.
3. Evaluate current and past quarterly earnings. A strong or weak earnings report affects the trend of the security price per share for months. Many news-based traders buy or short a company based on significant earnings turnarounds. In anticipation of an earning report date, companies increase or decrease in price per share based on the pessimism or optimism of the buyers. If a company decreases significantly before an earnings date, then the company releases earnings which are better than the previous quarterly earnings, the company is more than likely to increase rapidly in price per share over the following weeks. Similarly if a company increases significantly before an earnings date, then releases earnings which are worse than the previous quarterly earnings, the company is more than likely to decrease in price per share over the following weeks.