Buying and selling off announcements vs. T/A

[Steve C]

Hi All,

Just a point of discussion, do many of you here use the technique of buying/selling on the back of positive/negative announcements? It would seem that at times if you could get in quick there would be plenty of money to be made...

Another question, how does T/A link in to these price spikes off announcements, I am assuming that most of the time its impossible for chart analysis to predict a positive announcement and subsequent jump in SP.

An example would be Sabre Resources who jumped 260% yesterday, but if you were to do some T/A on their charts the day prior you would see no real buy signals etc?

Is it a common method to perhaps use a mix of T/A and annoucements when short term trading?

Interested in hearing people thoughts.

Steve

 

[CanOz]

Re: Buying and selling off announcements vs T/A

If you use VSA then perhaps you may be able to enter a trade prior to news based on some absorption/acceptance/rejection of price at a level. The move on the news being 'baked into the price' before hand.

Generally though, its the reaction of the market to the news that gives a more telling sign. For example, if an issue closes well off the highs on high volume after an announcement then you could say that sellers used that opp to sell into strength.

I think Tech/A could give you some good examples of this. Actually Pavilion has done some good analysis on price reactions too i believe...

CanOz

 

[Steve C]

Anyone else have any inputs?

 

[tech/a]

Anyone else have any inputs?

Sorry Steve I hadn't answered because its a fairly complex answer.

I've promised myself not to get involved in "education" ---- big waste of time.

But will point you in a direction.
Most news is factored into price before an announcement is made.
In anticipation of both good and bad news.
Youll have heard
"Buy the rumour---sell the fact."
Often true.

Really in many cases announcements will only deliver short term participant reaction.
What you need to know as a discretionary trader is.

Do I hop on this announcement?
or do I sell the position I currently hold in it after the announcement?
or do I buy more?
or can i trade the volatility?

As Can has said you'll need to have a tool which gives you an understanding of what the market participants both old and new are doing.

I like Can use VSA
My VSA has a personal flare not found in books but through experience in 18 yrs of charting.
But even basic VSA will be helpful. Volume Spread Analysis.

So lets have a look at one as it pans out
SBR
As we can see a really strong reaction to the announcement with massive volume
Then Moderate volume reversing and losing a bit of shine
Then we have today---based on today's action how would you answer the questions I posed above?

Click to enlarge

 

[burglar]

...

An example would be Sabre Resources who jumped 260% yesterday, but if you were to do some T/A on their charts the day prior you would see no real buy signals etc?

I've wasted a decade of thinking time on this.

Just when I think I am making progress, along comes another surprise.

"COPPER DISCOVERY AT GUCHAB"

Yet the copper was no secret, the discovery is not new (though it has now been drilled).
The copper, the location, the drilling program is all reported in the quarterly report.
There was a surprise on the upside.
The Target depth was increased to accomodate the true width of the deposit!


Speculators had 12 minutes to absorb the news, on deciding it was good, they went on a spree!
My guess is they were waiting in the wings (or sitting on the fence) fully wound and ready to fly.

 

[skc]

Hi All,

Just a point of discussion, do many of you here use the technique of buying/selling on the back of positive/negative announcements? It would seem that at times if you could get in quick there would be plenty of money to be made...

Plenty of good traders do this. The difficulty, like most methods, is that you need to be good at it to make it right.

You don't even need to look at the specie end of the market - look at large caps after profit reports. If you have at hand the analyst earning estimates and a company delivers a handsome "beat", you can buy on open, wait for the next day or two in terms of recommendation changes and watch money flow into the stock. Similiar for a stock that reporeted short of expectation.

DOW and UGL were two great examples in the last week of what a stock can do after earning report. While their movements are not nearly as great as SBR jumping 260%, you can certainly afford to put on a larger size vs the penny dreadfuls, and possibly earn more $$ in absolute terms.

 

[statmech71]

I've promised myself not to get involved in "education" ---- big waste of time.

I for one am very sad to hear this Tech - I have found your posts to be enlightening, clear, to the point and of immeasurable value, and as such was always keen to log onto ASF to see what else I could learn off you. I'm sure that my sentiment is not only confined to myself, but am sure that many others feel this way about your educative posts, which you generously spent the time and effort in compiling for the sake of us newbies.

Anyway, there is still a whole body of material that you have contributed on ASF for me to go through still (I've only read about 1000 of your 12000 posts). I'd like to sincerely thank you for your generosity, and would kindly ask you to reconsider your stance on providing educative insights.

I wish you and your family all the very best.

Paul

 

[tech/a]

I for one am very sad to hear this Tech - I have found your posts to be enlightening, clear, to the point and of immeasurable value, and as such was always keen to log onto ASF to see what else I could learn off you. I'm sure that my sentiment is not only confined to myself, but am sure that many others feel this way about your educative posts, which you generously spent the time and effort in compiling for the sake of us newbies.

Anyway, there is still a whole body of material that you have contributed on ASF for me to go through still (I've only read about 1000 of your 12000 posts). I'd like to sincerely thank you for your generosity, and would kindly ask you to reconsider your stance on providing educative insights.

I wish you and your family all the very best.

Paul

Thanks Paul
I understand that some appreciate the effort.
Yourself Pav,Can,Boggo and some others.

But take the post above in which I posed some questions
The OP (or anyone else for that matter) didnt even bother to reply--so what the hell am I doing wasting my time being involved?

Often when presenting analysis on Fundamental stock threads the crap which comes back just has me convinced they can go right ahead and trade as they like. So hence my decision.
Sure Ill post but wont go the educational path.

There are 12000 posts and an archive search function.
Other more important things to do.

 

[Steve C]

Thanks Paul
I understand that some appreciate the effort.
Yourself Pav,Can,Boggo and some others.

But take the post above in which I posed some questions
The OP (or anyone else for that matter) didnt even bother to reply--so what the hell am I doing wasting my time being involved?

Often when presenting analysis on Fundamental stock threads the crap which comes back just has me convinced they can go right ahead and trade as they like. So hence my decision.
Sure Ill post but wont go the educational path.

There are 12000 posts and an archive search function.
Other more important things to do.

Tech - I certaintly did read your post and thank you for the effort of such a detailed response.

To be perfectly honest I have no idea how to answer your question that you posed to me because I am at such a primal stage of understanding how charting and technical analysis works that I simply don't know how to respond. As statmech says your insights are most valuable and greatly appreciated - we are lucky to have someone of your knowledge and experience actively contributing to this forum.

Steve

 

[springhill]

I am in the orchard ATM so sorry I cant post more information or a chart, but if you want the complete opposite of SBR take a look at QRL.
Perhaps a techie could run an eye over it to see any precursor negative signals

 

[CanOz]

I am in the orchard ATM so sorry I cant post more information or a chart, but if you want the complete opposite of SBR take a look at QRL.
Perhaps a techie could run an eye over it to see any precursor negative signals

It had a couple of nasty down days, but then it 'jumped the creek' and opened below its previous support. Then it was goodbye!

CanOz

 

[springhill]

It had a couple of nasty down days, but then it 'jumped the creek' and opened below its previous support. Then it was goodbye!

CanOz

Here is the chart.

 

[CanOz]

Yeah, here is what i was talking about...Even with a stop loss you'd been off your risk limit. Nasty...must have been surprise bad news?

 

[DaveMac]

Nice looking chart guys, looks like the market didn't take their "assay results" announcement yesterday too well!


Just jumping back to the main question quickly - Steve, CanOz, Tech and others, is it the "Post Earnings Announcement Drift" you're looking at here?

It was a research project from the 60s, which states that stocks with a "positive earnings surprise" have a higher probability of continuing to drift upwards over 30 to 90 days.

Wiki link here: http://en.wikipedia.org/wiki/Post-earnings-announcement_drift

I've done some testing on it, and it works - not all time (nothing in the market does) but well enough to give an edge.

Cheers,

Dave

 

[CanOz]

Nice looking chart guys, looks like the market didn't take their "assay results" announcement yesterday too well!


Just jumping back to the main question quickly - Steve, CanOz, Tech and others, is it be the "Post Earnings Announcement Drift" you're looking at here?

It was a research project from the 60s, which states that stocks with a "positive earnings surprise" have a higher probability of continuing to drift upwards over 30 to 90 days.

Wiki link here: http://en.wikipedia.org/wiki/Post-earnings-announcement_drift

I've done some testing on it, and it works - not all time (nothing in the market does) but well enough to give an edge.

Cheers,

Dave

I think they were looking for hints in the price action of inside selling...

 

[DaveMac]

I think they were looking for hints in the price action of inside selling...

Ah, fair enough.

 

[tech/a]

Yeah, here is what i was talking about...Even with a stop loss you'd been off your risk limit. Nasty...must have been surprise bad news?

Why would you still be in this trade before it tanks
Technically the tested top would have had you out.
As a techie you generally ( Read I ) have no interest in sitting in consolidations.

 

[Julia]

Tech - I certaintly did read your post and thank you for the effort of such a detailed response.

To be perfectly honest I have no idea how to answer your question that you posed to me because I am at such a primal stage of understanding how charting and technical analysis works that I simply don't know how to respond.

So maybe just say this in response, rather than nothing. There's absolutely nothing wrong with saying you don't feel able to answer any question posed to you.
Then, at least, the person putting up a question in an attempt to be helpful doesn't feel he is just being ignored.

 

[CanOz]

Why would you still be in this trade before it tanks
Technically the tested top would have had you out.
As a techie you generally ( Read I ) have no interest in sitting in consolidations.

Absolutely, can't imagine why i would ever be in a trade like that anyway, was just stating that IF you were, the stop would have hurt a bit. Obviously not more than not having a stop though...

CanOz