The purpose of this Market Call section is to
educate readers in technical analysis patterns and indicators. As with all investment
information, you need to research information and consult your financial advisor before
initiating any strategies that are contained in Market Call.
Also, you must realize that as with all trading strategies,
opinions can change quickly depending on market conditions and developments.
This column tries to present historical examples, potential set
ups, and examples of entry and exit strategies.
Over reactions to News and News Articles
I am always fascinated with the reactions to news and news
articles. Newspapers and magazines like the Wall Street Journal, Barron’s and
Investor's Business Daily can move markets. But do these articles just hype a stock or are
the moves sustainable?
My questions is always "who knows what is being published
and when did they know it?"
Let's take a look at General Motors, GM.
Late last week we saw GM break from a resistance area at 65 and
run to 69 on Friday July 2. The front-page story in this week Barron's was on GM. When
trading opened on Tuesday, GM gaped up and quickly ran to 72 7/16 by noon on Tuesday.
Despite a positive market and new highs in the DOW on Wednesday
July 7, 1999, GM closed down 1 9/16. The failure of GM being able to hold this gap from
the story is a negative pattern. Was this run up on improved fundamental developments at
the company or the anticipation of the news story in Barron's.
I would exit GM on any morning weakness. An aggressive trader may
want to consider a Short position here with a stop at 72.
