Stock prices are always changin'-and-a-movin' in the stock market. But what exactly makes a stock's price move? Knowing what can cause stocks to move will make you better prepared when making investment decisions. So, let's get you better prepared!
Here are 6 events you should know about if you want to make money with stocks.
6 Events that Move a Stock
An earnings announcement is when a company publicly announces how well they did financially for the previous quarter. Companies will also talk about any research and development that they're doing or any plans they have for moving forward.
Earnings announcements cause movement in a stock leading up to the day of the announcement and they days following the announcement. The movement in a stock before the actual announcement is caused by people anticipating how well (or how bad) they think they company performed. The movement you will see in a stock after the announcement is people's reaction to the information announced and how well the company actually performed.
You can find the date for each company's earnings announcement on Yahoo Finance.
A stock split is when a company increases the number of shares that are out on the market by taking each share and splitting it in half (or thirds, depending on the type of stock split).
A common split is a "two-for-one" split. This is when a company takes one of your shares and splits it in half. This will reduce the overall price of each share but you.
Here's an example... if company ABC has a hundred thousand shares on the market that cost $100, and they do a "two-for-one split", the result is 200,000 shares on the market at $50.
After companies announce they will be having a stock split the actual action of splitting the shares usually doesn't occur until several weeks later. This time between when the stock split is announced and when the split actually occurs is when you will see increased movement in a stock.
Economic news, stock market news, industry news, all cause movement in stocks. You want to be aware of what's going on in these different areas of the news in case there is something going on that have an effect on your stocks when you're trading and investing.
The recent news surrounding Brexit was a great example of the news causing movement in stocks. After Britain voted to exit the European Union, there was a big decline in the stock market for a few days after the announcement. Other examples of the news causing movement in stocks are the 2017 election in the US, terrorist attacks in Brussels and the 9-11 attacks.
Mergers and Acquisitions
Mergers and acquisitions are two business transactions that can cause movement in stocks. A merger is when two companies merge together. An acquisition is when one company buys out another company.
Now they may not necessarily have the reaction you think. For instance, Tesla announced not too long ago that they're going to buy Solar City and that had a negative impact on one stock, but not the other.
Whether it's going to cause movement going up or down really depends on everyone that owns the stock, their whole emotional sentiment about the news that was announced. Are they happy about it being bought out, are the happy about the to merging? Again that's just one other thing to look for when there's movement your stocks that could be one of the things causing it.
Upgrades and Downgrades
Upgrades and downgrades are analysts' opinions on the expected performance of a stock. An upgrade is when analysts feel a company's financials and other data indicate a positive outlook for the company and its stock price. A downgrade is when analysts feel the positive outlook for a company has decreased from their previous recommendation.
Now, it all depends on who owns the stock, and what the overall sentiment is, but usually when a stock is downgraded it will cause the stock to go down. When a stock is upgraded it will tend to cause the stock to go up.
A stock buyback is when a company will buy shares back from the stock market. This will reduce the number of shares that are out there on the stock market as well as reduce your stake in the company. A stock buyback can give a company more money to invest in themselves for research and development or other improvements. Stock buybacks are usually seen as a good move by investors and will cause the stock price to increase.
Each of these events can cause increased movement (up or down) in your stocks. It's important to be aware of these events so when you are trading and investing you don't end up selling for arbitrary reasons. Instead, you'll be able to identify that a stock may be moving a certain way because the company had it's earnings announcement, stock buyback or other event. Or when your stock price changes from $100 to $50, you know there was a stock split and it didn't plummet $50!
Want to know how to make money on your stocks around these events? Join us in Trade Your 9 to 5 where I give you the exact steps I use to take advantage of movement around each of these events to make money on stocks! Registration opens soon so be sure to get on the VIP list!