After asking for feedback on Stockstreet’s stock letters on April 20th, I received an interesting email. In it, a reader wrote that the markets are experiencing a lot of…
Problems with news trading
by Sven Weisenhaus
After we am 20. April for feedback on the stock market letters from Stock Street asked, I received an interesting email. In it, a reader wrote that there was a lot of context in the markets that could be used to make profitable short-term trades. As an example, he cited the publication of the business figures and the outlook of JP Morgan on Friday, April 14, 2023, after which the prices of other banks (Commerzbank, Deutsche Bank) also rose. And if “If one were to point out such connections, it would [..] either save potential customers suffering or bring profits“, if a stock exchange letter had a trading strategy in the drawer in advance, says the reader. I replied on Saturday as follows:
Problems with news trading
For your example with the bank stocks and the [..] I can also give you examples of price reactions where shares have fallen significantly despite positive company reports – according to the motto: “Sell on good news” or “By the rumors, sell the facts”. So, unfortunately, it’s not very helpful to point out specific events in the hope of knowing in advance how prices will react.
The price reaction to Friday’s US job market report was not necessarily to be expected either. Because it was far better than expected in terms of the newly created jobs. That could have triggered interest rate concerns. But instead, investors looked to either the higher unemployment rate, which could dampen interest rate concerns, or the strength of the job market, which is good for the economy and corporate profits. In any case, they interpreted the data positively, and so stock prices rose.
Unfortunately, there is no trading strategy with which one could sensibly bet on certain market events in advance. If it were that easy, everyone would get rich in the stock market.
Basically, in the Stockstreet listings but of course, certain market and company developments are pointed out, which are then also bet on with corresponding trades. However, the focus is not on individual events, but on developments that can be assumed to continue and thus have an impact on the price.
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