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Understanding Share Price Movement

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tradez

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Hi all,
Sometimes I really struggle with figuring out the reasons behind the movement of a companys share price. It seems logic would dictate that a fundamental announcement would push a share price in one direction when infact it ends up going the other. I was hoping someone could give me some insight on LEI for example. Yesterday they posted excellent earnings/profit growth and have forecast a rosy outlook for next year with heaps of work contracted. Yet today their share price is being bashed even though many media articles are popping up today casting a positive view on the companys results. I havent been able to find any reason for the price drop. Am I missing something obvious? I would like to hear peoples reasoning on this.
 
Because all those who were going to BUY anticipating a good report have already BOUGHT.

Would be the same with TLS, if T3 or a Mac buy in was announced, all those who have anticipated this have already bought in.


Cheers
 
A drop in the SP isn't necessarily a reflection on LEI. Most of the market is down today.

I haven't been following this company but often the contents of a report have already been factored into the SP so there's little discernible reaction when the report actually comes out.

CBA produced an excellent report recently and the shares have dropped ever since!

You're entitled to feel confused!

Julia
 
coyotte said:
Because all those who were going to BUY anticipating a good report have already BOUGHT.

Would be the same with TLS, if T3 or a Mac buy in was announced, all those who have anticipated this have already bought in.


Cheers
Click to expand...

I follow this line of thinking but I would have expected the share price to be reasonably stable or maybe take a small hit since the overall market is down today but I am surprised that it got hammered considering the overwhelming number of positive news today and yesterday.
 
Julia said:
A drop in the SP isn't necessarily a reflection on LEI. Most of the market is down today.

I haven't been following this company but often the contents of a report have already been factored into the SP so there's little discernible reaction when the report actually comes out.

CBA produced an excellent report recently and the shares have dropped ever since!

You're entitled to feel confused!

Julia
Click to expand...

Hi Julia,
It's funny you mention CBA because I have been following the price movement since their recent profit announcement and that also had me stumped. I've obviously got a lot to learn about reading the market.
 
In my opinion it's not the fundemental announcements that are primarily moving the markets. Sure they have an influence at time, and we see this as evidenced by pseudo or mirco waves in the market.

I know this is contrary to what most folk beleive to be the case, but in my opinion it is the crowds "perception" as whole of an announcement that moves the market. However what someone percieves as good news someone else may have perceive as mediocre. After all we are only human, if we all thought alike then there would be probably less fluctiations in the markets. Markets are never in equilibrim, rather they are always passing through an equilibriem to an extreme.

One of the most things we all find out as traders is that "What seems logical in the markets, is usually what does not happen"

Cheers
 
wavepicker said:
In my opinion it's not the fundemental announcements that are primarily moving the markets. Sure they have an influence at time, and we see this as evidenced by pseudo or mirco waves in the market.

I know this is contrary to what most folk beleive to be the case, but in my opinion it is the crowds "perception" as whole of an announcement that moves the market. However what someone percieves as good news someone else may have perceive as mediocre. After all we are only human, if we all thought alike then there would be probably less fluctiations in the markets. Markets are never in equilibrim, rather they are always passing through an equilibriem to an extreme.

One of the most things we all find out as traders is that "What seems logical in the markets, is usually what does not happen"

Cheers
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Wavepicker

I think you're pretty well spot on. Peoples perception of a stock is what moves the stock. Usually their perception is quite an accurate reflection of the underlying fundamentals, but not always.
The trend of the chart show us more clearly than anything else, how the masses are perceiving the stock.
This is invaluable information for a trader......without needing to study the fundamentals he can simply trade with the trend, control his losses, let his profits run. Any trader who does this consistently can make money regardless of market conditions.

Bunyip
 
Very interesting topic. Look at COH today. Record profits yet the stock drops like a stone. "Buy the rumour, sell the fact" is a very serious variable in analysis. People in the know already know and have already acted. The inside track into that knowledge, in my humble opinion, is volume. Watch and learn from volume. Short COH at $54.05 and took profits at $49.33 today.
 
Nick Radge said:
Very interesting topic. Look at COH today. Record profits yet the stock drops like a stone. "Buy the rumour, sell the fact" is a very serious variable in analysis. People in the know already know and have already acted. The inside track into that knowledge, in my humble opinion, is volume. Watch and learn from volume. Short COH at $54.05 and took profits at $49.33 today.
Click to expand...

Nick

How about 'On Balance Volume', do you think it has any useful role to play in showing us whether the volume is buying pressure or selling pressure?

Bunyip
 
bunyip said:
Nick

How about 'On Balance Volume', do you think it has any useful role to play in showing us whether the volume is buying pressure or selling pressure?

Bunyip
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Try out "Twiggs Money Flow 21d " ( incredible charts)

OBV 21d /13d -- if 21d above = Acc , if below = Dist

Cheers
 
OBV has errors, as do other indicators such these new depth one's being thrown around. Take OBV. It adds the volume of up closes and subtracts the volume of down closes. If you take a classic reversal pattern, such as a blow-off top, where prices spike higher on huge volume, close near the lows of the day yet above yesterdays close. This is a classic sign of sellers entering - more so when there are exhausted buyers in the background. However, OBV will view this as positive volume and add it onto the accumulated total.

Its very important to read the relationship of price AND volume, not just volume.
 
Nick Radge said:
OBV has errors, as do other indicators such these new depth one's being thrown around. Take OBV. It adds the volume of up closes and subtracts the volume of down closes. If you take a classic reversal pattern, such as a blow-off top, where prices spike higher on huge volume, close near the lows of the day yet above yesterdays close. This is a classic sign of sellers entering - more so when there are exhausted buyers in the background. However, OBV will view this as positive volume and add it onto the accumulated total.

Its very important to read the relationship of price AND volume, not just volume.
Click to expand...

Nick, Thanks for the reply. In the situation you mention, OBV could certain give the wrong message.
 
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