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Trade the News: Part 1 - StocksTrading newsflow isn't an exclusive privilege reserved for professional traders with access to extensive teams of analysts. With a bit of preparation and a dose of discipline, any trader can tap into the added volume and volatility that news injects into the market. In this two-part series, we present a 3-step template for trading scheduled news events in both the stock and forex markets. Let's dive in and explore the fast-paced world of news-driven trading. Stock Market News: Volume & Volatility The Beauty of Being a Short-Term Trader: Short-term traders thrive on nimbleness and the ability to navigate both sides of the market dynamically. This approach values volume and price volatility—two factors that flourish with newsflow, the release of new information into the market. Scheduled and Unscheduled Newsflow: Scheduled Newsflow: Events with set release dates and times, including earnings reports, economic indicators, and planned corporate announcements. Traders can prepare, analyse expectations, and strategize for these events. Unscheduled Newsflow: Unforeseen events that can occur at any time, such as surprise takeover bids, unexpected geopolitical developments, or unscheduled profit warnings. While unscheduled events often have the most significant impact on stock prices, they are less predictable and require considerable experience to navigate effectively. Finding the Sweet Spot: While we appreciate the volume and volatility that news brings, preparation is key. The sweet spot is a news event that can be planned for but has the potential to bring substantial volume and price volatility. This series will specifically focus on how to trade scheduled newsflow. 3-Step Method for Trading a Scheduled News Event: E.R.T. Step 1: Expectation: This step involves doing background work to set the scene. Understand the exact time and nature of the event, along with both theoretical and real-world expectations. Theoretical Expectations: Analyst forecasts provide a benchmark, and CEO comments from prior updates may offer insights. Real-World Expectations: Reading the market and making judgments on price action leading up to an event help gauge real-world expectations. Step 2: Reaction: The market’s reaction to the newsflow is crucial. Three types of reactions include: The Damp Firework: A tepid reaction, indicating that the news was in line with real-world expectations. The Grower: A mild reaction backed by a strong beat on theoretical expectations, creating intra-day trends. The Shock: A clear and obvious reaction, involving an opening gap and potential for powerful trading setups. Step 3: Trade: This step involves combining the news-based catalyst with a technical catalyst. There are many ways to do this (check out our Power Patterns series – link at bottom of the page), but the best place to start is by trading breakouts from key levels. What is a key level? This is a support or resistance level that is clearly visible on the daily candle chart and across multiple timeframes. How do I enter? Traders may enter on the first pullback on the hourly candle chart following the breakout. This will ensure that you’re not chasing the market and should assist you in keeping calm during the intense heat of a news-driven breakout. How do I manage my risk? Stops can be placed below the swing low of the first pullback (above if trading a bearish breakout). A simple 2:1 reward ratio is a robust method for taking breakout profits. More sophisticated methods can be refined over time, such as taking partial profits on the first sign of exhaustion and trailing stops on the remainder of the position below hourly swing lows. Case Studies: Experian Half Year Results 1. Expectation Theoretical expectations were set by Experian’s board prior to the Half Year Results – 5% organic revenue growth and benchmark EPS of $0.70. Real world expectations looked mildly negative with prices carving out a broad series of lower swing highs. Prices were not oversold heading into the publication of the Half Year Results. EXPN Daily Candle Chart Past performance is not a reliable indicator of future results 2. Reaction The initial reaction on the hourly chart was clearly bullish with prices gapping higher and maintaining their gains during the opening rotation. Experian had comfortably beaten both theoretical and real-world expectations – we have confirmation that a news-based catalyst is in place. EXPN Hourly Candle Chart Past performance is not a reliable indicator of future results 3. Trade There were two opportunities to buy pullbacks on the hourly candle chart following the news-driven breakout. Timing your entry into pullbacks can be refined by drawing a simple trendline which tracks the pullback – a close above the pullback trendline can trigger your entry. EXPN Hourly Candle Chart Past performance is not a reliable indicator of future results Rolls Royce Capital Markets Day 1. Expectation A Capital Markets Day is a chance for the CEO to sell the company’s strategy to shareholders. Real world expectations were high with the shares locked in a powerful uptrend. However, it’s important to note that prices did not look overbought heading into the event. RR. Daily Candle Chart Past performance is not a reliable indicator of future results 2. Reaction The markets’ reaction was decisively bullish with prices breaking well clear of resistance during the opening rotation. This gave traders clear evidence that there was a news-based catalyst supporting the stock. RR. Hourly Candle Chart Past performance is not a reliable indicator of future results 3. Trade Following the initial breakout move prices puled back within a low volatility flag formation – creating the ideal point of entry with a stop below the flag lows. This example clearly demonstrates the power of combining new-based and technical catalysts to create strong trade setups. RR. Hourly Candle Chart Past performance is not a reliable indicator of future results Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
LSE:RR.
by Capitalcom
The fad is over. Trouble BrewingFollowing the worst IPO in history, and subsequent failure to lead a legal and profitable business, on March 4th (less than two weeks) Will Shu's "golden shares" will lose their status. Eager investors will be keen to cut fees paid to riders and increase charges to restaurants and customers, only to find that they have already pushed all of their partners to the limit, and they still can't turn a profit. Investing in this company now, you have to bear in mind the potentially illegal aspects of the business that Will Shu-reley be addressed soon. That is the illegal e-bikes, and the illegal immigrants. This is not a controversial statement. Without the speed of these bikes, or the kind of employees that have to accept sub-minimum wage pay, this business model is kaput. Of course, we all know, the story is told in the charts, and we have a bear flag with rsi divergences. Low levels of customer satisfaction. Run by a skeleton crew in the Philippines, with an app that hasn't seen any meaningful development in years. This is no Amazon, this serial loss of investor money and debt is not going to turn into a global megacap, sorry...
LSE:ROOShort
by hameggnchips
Rolls-RoyceFounded in 1904, Rolls-Royce plays a significant role in the global economy up to date. The company operates in different economic sectors and serves a broad market: Civil Aerospace: 1. Major airlines: They supply engines to leading airlines worldwide, including Emirates, Singapore Airlines, Lufthansa, and American Airlines. 2. Aircraft manufacturers: They work closely with Airbus and Boeing, providing engines for their commercial aircraft models. 3. Leasing companies: Leasing companies like GE Capital Aviation Services (GECAS) and AerCap are also customers, acquiring Rolls-Royce engines for their fleets. Defense: 1. Governments and Armed Forces: They supply jet engines and propulsion systems for military aircraft used by air forces and navies around the globe. 2. Defense contractors: Major defense contractors like Lockheed Martin, Northrop Grumman, and BAE Systems rely on Rolls-Royce engines for their aircraft programs. Power Systems: 1. Shipbuilders and ship owners: They provide engines and propulsion systems for various types of ships, including cruise ships, container ships, and offshore vessels. 2. Industrial companies: Industrial users like power generation companies, mining operations, and data centers utilize Rolls-Royce engines for power generation and other applications. 3. Railroad operators: Locomotive manufacturers and rail operators purchase Rolls-Royce engines for their trains. Electrical Aviation: 1. Aerospace companies and startups: As they develop electric and hybrid-electric aircraft, these companies look to Rolls-Royce for expertise and potentially, propulsion systems. 2. Governments and regulatory bodies: Collaboration with these stakeholders is crucial for shaping the future of sustainable aviation and integrating new technologies. We will be looking at adding Rolls-Royce to our portfolio as the company strives to shape the future of energy and mobility.
LSE:RR.Long
by Candles254
1
Breakout Alert: easyJet (EZJ)Trading Update Creates Catalyst for Breakout easyJet released a market-beating trading update last week which has created the catalyst required for a major breakout. The trading update, covering the quarter ended 31st Dec 2023, painted a positive picture of easyJet's financial performance and outlook. Despite facing headwinds from the conflict in the Middle East, the airline reported a narrower Q1 headline loss before tax of £126 million, an improvement from the £133 million loss in the same period last year. Crucially, easyJet's strategic focus on disciplined capacity growth and a strong customer-centric approach appears to be resonating with investors. Passenger growth of 14% year-on-year and a 3% increase in Revenue per Seat (RPS) in Q1 contributed to the overall positive sentiment. The shares gapped higher on the day of the trading update (24th Jan), taking prices into a key area of resistance created by the cluster of highs that formed during the first half of last year. Yesterday’s price action saw the shares break and close above the resistance zone – signalling that a major breakout is potentially underway. easyJet (EZJ) Daily Candle Chart Past performance is not a reliable indicator of future results A Closer Look Monitoring a breakout on a lower timeframe provides insights into its sustainability. On easyJet's hourly candle chart, a pattern of higher swing lows is emerging, suggesting that the market might be establishing the broken resistance as a new support level. Traders should exercise caution against false breakouts. A close below the series of higher swing lows, bringing the market back below resistance on the hourly candle chart, would serve as an early warning signal. easyJet (EZJ) Hourly Candle Chart Past performance is not a reliable indicator of future results Risk Management: Those looking to take trades in easyJet should consider incorporating ATR into their stop placement as this will dynamically account for current levels of price volatility. On easyJet’s corporate calendar we have a number of dates worth noting: Wednesday, January 31st: easyJet Holidays Seminar Thursday, February 8th: easyJet Annual Shareholders Meeting Thursday, February 22nd: Dividend - 4.5000 GBX Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
LSE:EZJ
by Capitalcom