Why do some stocks trend in the opposite direction after good results?

There are many reasons for this to happen however news trading is the main reason.

One of the biggest reason in a stock moving down even after good results is the news.

                                 

The news may be of :-

1. The company had a profit of so & so rupees today.
2. A new plant has been set up by the company.
3. Share buy back today.
4. Deals of various kinds.
5. Merger to take place or has taken place.
6. A new policy has been passed.
7. Government decision which would benefit the company

And many more….

So imagine a news of a positive sentiment about the company flowing around like a wild fire on radios, television, newspapers, grapevine communication etc.

So what would the first thought that comes to your mind:-

Everyone will tend to buy to stock right?

I.e. the CMP of that particular company should move up? Correct?

Then why does it happen that the script moves down rather than going up?

First of all, it can be categorized into two reasons :-

• The news doesn't reach all people equally.
• All the people do not interpret the news in a similar manner.

These could some of the major reasons for the stock moving in a downward direction.

There are many reverse trend traders who deliberately short the stock even if the news is good and people are hoping it to move up. This can cause a delirium within the buyers and sellers and in which sometimes sellers can also win making the stock to move down even after good results.

Moreover, imagine if a company opens huge gap up after good results and moves down after that. Then why does it move down in the first place even after opening high?

It may be because of the old buyers mainly the swing traders, BTST call trading people, weekly buying people and also can be the monthly buying traders who have already bought the stock previously.

And after the good results if the script opens a huge gap up, they tend to book profits which causes the script to move down.

Okay,clear till now?

Now after the script starts moving down, the blind Intraday or BTST traders who have bought the script today in lieu of huge profits even after the stock has opened a huge gap up tend to meet their stop loss due to downward motion and because of that the CMP moves down again.

Okay?

Now when the CMP has moved a little bit down again, there are fresh sellers who tend to short sell the stock seeing that the trend is changing and the stock is moving down. The entry of fresh Intraday or delivery sellers causes the stock to move down further.

I hope its clear now.

This can be one of the reasons for a script to move down even after good results or a gap up open however there can be many more.

Note:- Remember, whenever you buy shares or instruments in a Capital market, its price rises and whenever you sell a thing in the markets, the prices decrease.

BY ABHIRAM DAPKE