An article from the Blog “Rational Analysis = Fundamental + Technical” Blog Author: Anonymous
Title: A safe way to treat analyst reports and news
I treat all analyst reports from the brokers and in newspapers as stocks to watch, as those are likely stocks in play or to be played. I would simply do nothing, either ignoring the news, or watch the chart price and volume actions patiently to look for trade entry signals. If I am holding the stock, and that stock comes with good news, I would look for exit signals. .
Many retail investors rely on analyst reports to make their investment decisions on stock picks and point of entry, and that is what can go wrong with their investment. While there is nothing wrong to pick a stock based on analyst reports, retail investors should be cautious to watch out for traps in analyst reports and news releases.
Very often, after a report circulated to the masses of retail investors or through news, this would be the time when impatient investors will make rash decision to buy or sell. But very often, rosy reports of results and news like “record revenues” historical profits”, “profits soared to a record high”, “signing of MOU”, “awarded a project”, “acquisitions and mergers”, “new investments” are news that attract retail investors attention to buy, but smart professionals money are actually net sellers by selling more to push up the volume to distribute their shares bought at lower price earlier.
Therefore, the safest action that an investor is to think and digest the news and watch patiently for actual trade actions until you are certain of the trade opportunity. If one knows TA, watch the price and volume of the chart before the news and analyst reports to analyse whether the price is already factored in the news. Being sideline will not subject you to financial risks, and with capital in hand, there will be many other opportunities in the market.
In short, whenever news reaches you through brokers, newspapers and internet forums, just watching without action is also a trade decision, and that will save you from losing money – a rule of thumb for managing the fear of missing out or fear of losing. Knowing technical analysis and thinking about the whole picture correctly will help in avoiding potential investment losses.
On this note, I wish my readers to beware of the news you read. You are reading what they want you to read, but the chart never lies!