Why You Should Buy The Rumour, Sell The News

Share On Facebook
share on Linkedin
Print

I was thinking about which question I get asked the most about investing. That got a little easier recently as we ask for questions in the “Naked Money” podcast.

©

I reckon this one comes up all the time:

“This company I hold issued a fantastic trading statement/results so how come it went down so much. It just does not make sense!

“Surely if the company has done so well, the share price should be going up after the statement.”

The answer to this is actually reasonably simple.

There is an old stock market saying: “Buy the rumour, sell the news.”

You bought a company and you’re happy and it keeps on rising. Then the statement comes out and it is excellent.

The reason the share price goes down is traders say: “Meh, great statement but all in the price now,  time to take profits.”

So the price goes down. As long as the company is going well, then eventually the price should start to go up again.

One idea to play this is if your share is about to report and the share price has risen a lot ahead of the statement why not sell some and bank the profit the day before?

Wait for the price to fall on the day, then wait a few more days for it to settle, then buy it back.

But what if a share price has done badly before a statement? Could be, as long as you like the company you could buy the day before as the price could go up on the day of the report if it’s good. Risky though!

It is always worth noting down when your companies are going to report so you aren’t caught out.

You can usually find out on ADVFN news – watch out for “Notice of results” statements then note them down.

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20211128 21:44:33