Trading The News In The Morning? Then Avoid Doing This…
When companies are in the news
pre-open, it pays to watch the action. Many traders will read good news, assume
the stock will rise, and place buy orders before the open. While this strategy may work at times, often the opening trade can be the high of
the day, and traders who went long get buried. This morning, Forest Labs
announced positive results for its Alzheimer therapy. Sounds promising, right?
But if you decided to buy just before the open, you were the first trade — and
ten minutes into the day, the stock made a high and sold off.Â
After the initial selloff, we posted this:
10:36:19
Intraday
Setup Alert
Forest Labs (FRX)
is staging a counter trend rally after rejecting news of a positive trial for
new drug therapy. The
stock is a member of TM’s Implosion
List, and is up 0.16 at 96.16.
The stock was already on TM’s Implosion
List, which means it’s in a downtrend. You can’t change that with one news
story. Any rally in the stock is against the main trend. Don’t get caught up in
the hype of always buying on good news (or for that matter, always selling on
bad news). Take each stock on a case-by-case basis, and trade the action.
Brice
PS If you want to get a feel
for how to trade the news every day, check out TM’s News
Reversal Service. At minimum, you’ll learn a lot, and may even make some
money while you’re at it!
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