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Is it priced in?

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June 27, 2012 – Comments (2)

I often see financial blogs talk about bad news being the reason for going short, or good news being a reason for going long.  But, if the bad news is all over the place, or the good news is all over the place, why wouldn't that news be priced in?

I also see blogs like "the stock is down on an up day" or "the stock is up on a down day" meaning the trend has reversed for that stock.  Why not look at it as a buying opportunity?  If the stock is down on an up day maybe it is a fluke and it should be up on the next up day?

Or if a stock plummets on earning it means investors have lost confidence.  If they lost confidence, why would they lose even more confidence to send it lower?

Do you fools have any indicators/insights to tell if the news or price action is already baked into a stock?

2 Comments – Post Your Own

#1) On June 27, 2012 at 4:14 PM, Mega (99.96) wrote:

What is your edge in reacting to news?

Obviously, it's not speed.  There are professionals and automated computer programs who are much faster at reacting to news than you are.

So that leaves analysis. You have to be smarter than other market participants and better at putting the news into context.

In general however, the context (all the news and financial results in the past) is more important than the latest piece of news. Companies don't just change on a dime.

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#2) On June 28, 2012 at 3:39 AM, ikkyu2 (99.17) wrote:

I feel like there are a lot of incentives for various sources to produce text, every day, that purports to 'explain' the movements of individual stocks or the market as a whole.  For example, if reporters write no articles, they will get fired.  If bloggers write no entries, they will have no readers, and their blogs won't make money.

However, I find that whenever I am not reading the blogs or listening to the news, the market still moves.  I don't think the market cares one whit what these bloggers or reporters say.  The only thing I ever pay attention to in these articles is "bond prices and yields move in opposite directions."  And actually when you see that piece of boilerplate, you can usually safely assume the entire article is boilerplate.

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