Its no secret that here at MarketClub we are technical traders. We look to the charts to reveal setups and trends that we expect to act a certain way. Technical trading is not for everyone though, that's why we have invited our friends from Benzinga to tell you a bit about trading the news. Enjoy and be sure to visit the Pro's at Benzinga for more insight on trading news.
Every day, investors from all over the world discuss the prospect of trading on technicals or fundamentals. It is much less common, however, that investors discuss the idea of trading the news. But by doing so, it can provide them with an opportunity for quick intraday gains, as market-moving headlines can make a stock soar or send it plummeting to its death.
Without question, the key to successful headline trading is to receive the news in real-time before the stock has made its move. The news regarding M&As, FDA approvals, increased guidance, or new contracts frequently (and immediately) send shares higher the moment the news is released. On the other hand, key personnel resignations, secondary offerings, and disappointing economic data generally provide profitable short opportunities. The moves can vary anywhere from a few percent points to more than 50% gains or 50% reductions.
Let’s take a closer look at some of the key investing opportunities that can be brought on by breaking news:
Fuwei Films moved 46% higher after reports that the company signed a supply letter of intent with Coca-Cola, while GSV Capital jumped 50% on the news that the company had acquired 225,000 shares of Facebook at an average price of $29.28 per share.
Additionally, news headlines can trigger longer-term bullish or bearish trends and work as catalysts to send the shares through technical support and resistance levels, which is why technical traders should not completely ignore the news.
If you want to keep up, it is essential that you use the right news service. You can’t have the patience for 30-second delays. You don’t have the time for missed opportunities that could have provided you with significant gains. You need a service that can provide you with the lightning-fast information that enables you to take advantage of every market-moving development.
Let’s look at reversal of trends in a stock price. Many times during the day, stocks spike wildly from rumors and other information. Most of the time, the stock will spike severely in one direction and, without notice, spike the opposite way. Thus, traders could be buying in at the top of the spike while everyone else is taking profits.
This is a huge risk with a slow news service. However, even if the moves are caught in time, many stocks reverse trend back to the start of the move, allowing everyone who held on at the beginning to hold an unchanged position if they didn’t get out.
There are many opportunities when trading the news. It allows you to get into stocks when they are spiking, and if you are quick enough, it will provide you with the ability to ride each move for big gains. These moves could be the start of a new mid/long-term trend or the catalyst to break technical levels.
Finding the right real-time news service is vital to take advantage of an opportunity in the market and make solid profits. In this industry, speed is everything.
Benzinga Pro News Desk