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RT's,
Regarding impact of announcements on the trading public:
I learned my lesson about public reaction to news a couple
of years ago.
I bought some GM puts, knowing they had some bad
numbers coming in. Paid $1000 with the stock at $35.
During the day before the numbers, the stock dropped to
$34, putting me $1 in the money. The options doubled to
$2000. That evening, GM posted a 1.4 billion dollar loss
for the quarter, the biggest in the history of the company.
I was already checking out the Rolex's. Then the stock
opened the next day at $37! My position was worth $500.
Got out with only a 50% drawdown plus commissions.
Seemed that everyone already knew the numbers were
going to be bad, but they felt that 1). now the bad news
is out, it can't get any worse, 2). it could have been worse.
What I really learned is that it's tough to call the short term,
meaning intra-day, mood swings for a particular. Sometimes
the entire sector will move in tandem, like all PC stocks
sometimes do. Then again, when one is doing well, they
figure that the others must be doing badly to allow this to
happen.
Bottom line for me, I can't predict how news will be interpreted
by the trading public. So, I stay out of the way unless I know
how it's going to play. I've also seen a lot of stocks that post
bad news in the evening gap down on the open and then
move up all day. The amatuers are getting out and the pros
are getting back in.
Something else I noticed. The time of the announcements
sometimes affect the movements. I commonly see movements
in either one or two days. If the news happens during the day,
I usually see a two day run. Insiders and those well connected
play it during the first day of the news. Joe six-pack sees
it in the evening paper and plays the next day. 2nd day moves.
When the news happens after the close of business, it usually
means a one-day move, cause we all see the flash at the
same time. Watch for these and see if you see them, too.
The after-hours news also helps the big boys that trade
the big buckets that we can't participate in.
I've heard it said that the amatuers own the open and the
pros own the close, hence the importance of the open for
candlestick charting. 24-hour trading will certainly make
us candlestickers rethink our indicators.
James
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WJame17842@xxxxxxx wrote:
>
> Norman,
>
> Next time a Bullish Economic report comes out like the Inflation Report go
> short on IBM, KO, INTC, MSFT, etc... theres to many to list, emotions should
> be left out of
> trading decisions, it should be an almost mechanical decision to buy on good
> economic data. History repeats itself every month in the markets, CNBC
> reports this data and some of the interest sensitive and economic sensitive
> stocks will rise or fall
> based on these reports since they are a short term indicator of the economy
> and one bullish report after another from month to month will push markets
> higher over the long term until data becomes bearish, then stocks go down.
NW: Willaim, have you ever heard, "buy the rumor, sell the news"?
Only amatuers wait until news is releasted to buy something that is
going up. By the time the news is released, it is time to think about
getting out.
Also, as a professional trader (floor trader?) I would like to know
when you have time to watch CNBC? Do they supply little hand held TVs
on the trading floor now? Gee whiz, technology sure is great. Hmmm, how
do you watch that little TV and hold your trading cards or hand held
trading terminal at the same time?
Pointedly,
Norman
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