Let’s face it. None of us is smart enough to know to what extent news will impact the stock price. We know that good news will have a positive influence and bad news will have a negative one. The question is “to what extent.” Even the very smart will not be able to figure this out correctly.
People tend to become overly optimistic or overly pessimistic as the case maybe. That’s why shares are sometimes very much overvalued and at other times undervalued. It is imperative that we understand this fact and act accordingly to our benefits. Everything has a fair price. If you buy the bluest of blue chips and greatly overpaid it, you may lose the most when the crash comes.
As the market goes higher and higher, it is becoming more and more dangerous. At extremely high levels, you must pay more and more attention to your charts and less on fundamentals.
One of the first things you must learn and commit to memory is that price moves in trends. Buy in an uptrend and sell in a downtrend, early. If you miss the boat, you may have to wait for another opportunity, to be safe.
When good news no longer causes the price to advance more even in heavy volume, this is an indication of distribution. Likewise, when bad news hit the market but the share price refuses to drop farther, it is a good time to start your accumulation.
