What affects share prices

Stock prices are influenced by business fundamentals, corporate and world events, human psychology and much more. Stock trading is driven by psychology as much as by business fundamentals, believe it or not. Fear and greed are the two of the strongest human emotions that influence the market. For example, it’s easy to get caught in the trap of selling a stock prematurely because it temporarily dipped and fear set in. On the other hand, it’s also easy to miss out on a respectable profit because greed told you to hold out for more, and then the stock falls back. One of the most important business factors in determining a stock’s price is a company’s earnings, including current earnings and projected future earnings. News from the company and other national and international events also play a big role in the stock’s direction. Some examples of this are oil prices, inflation and terrorist attacks. Every analyst and trader has a different idea of what the stock price should be now and where it might be in the future, and trading decisions are made accordingly.

Bad news or ‘good’ bad news?

– Redundancies

This is usually good for the company and its share price because expenses will decrease significantly and quickly. This should help to increase revenues directly. It’s not always a big warning sign; it could just be a reaction to a slowing economy. It is one of the quickest ways a company can reduce spending if sales have not met expectations.

– Store closures

This event often causes the share price to go up for the same reasons as redundancies. However, this is not always the case. Indeed, closing stores requires a lot of money, and the positive effects of it do not happen right away. This could be a sign that the company is really struggling at the moment. They are likely to have lower sales and higher expenses than they would like, possibly due to a slowdown in the industry or the overall economy. The good news is that their management is proactive in maintaining profitability. Unfortunately, the share price could go down in the coming months.

– Dismissal of the CEO or company officials

This may sound very negative at first, but it shows that the company’s board of directors was brave enough to take drastic measures to help the company in the long run. The share price may go up or down after this announcement, depending on the situation. In some cases, this event could be a sign of corruption that goes beyond these individuals and there could be more negative announcements to come.

– Market scandals

Traders tend to frown on the corruption in the stock market. Fund scandals that have occurred in recent years and corporate corruption like Enron are two such examples. If people cannot trust the stock market, why would they invest their hard-earned money in it? In these situations, it is more difficult for the market to go up because there is a lower demand for shares.

Analyst recommendations

Many traders rely on experts’ opinions about companies and future stock prices. Are they always right? Of course they are not. No one can predict what will happen in the future. However, they can make informed guesses based on the past performance and future prospects of the companies and industries they follow.

Even numbers

Traders often like nice even numbers for their perceived stock price, such as $10.00 or $35.00. It is common for prices to settle near these numbers, at least briefly. Many traders also place automatic buy or sell orders right near those numbers, making the stock price somewhat erratic once it reaches that target.

Technical analysis

One of the most popular methods to help predict a stock’s price, at least in the short term, is called technical analysis. This method involves looking for patterns or indicators in stock prices, volumes, moving averages and many others over time. Obviously, no one can predict the future but this method can be effective in many cases because people are somewhat predictable. For example, when people see a stock start to fall dramatically, they often panic and sell their positions without investigating what caused the fall. This causes even more people to sell their shares and it often leads to an ‘overshoot’ of the share price. If you think the price went too far down, you can try to buy it at the bottom and hope it comes back to a more reasonable level. Another common example is moving averages. Many traders like to chart 50-day and 200-day moving averages for their stock prices along with the prices themselves. When they see the current price cross above one of these moving averages on the charts, it could be an indicator of a change in a long-term trend and it may be time to buy (or sell) the stock.

Expected vs realized income

A company’s realized and expected earnings have a significant impact on the movement of its stock price. Realized earnings refer to a company’s actual earnings for a given period, while expected earnings are what investors predict the company will earn in the future. When a company’s realized earnings exceed expectations, it is often a positive sign for investors and leads to an increase in the stock price. On the other hand, when realized profits fall below expectations, stock prices tend to decline as investors believe that the company’s future prospects may be challenging. Overall, realized and expected earnings play a crucial role in determining investors’ perception of a company’s financial performance and can significantly affect the movement of the stock price. Another common example is moving averages. Many traders like to chart 50-day and 200-day moving averages for their stock prices along with the prices themselves. When they see the current price cross above one of these moving averages on the charts, it could be an indicator of a change in a long-term trend and it may be time to buy (or sell) the stock.

Expected vs realized income

A company’s realized and expected earnings have a significant impact on the movement of its stock price. Realized earnings refer to a company’s actual earnings for a given period, while expected earnings are what investors predict the company will earn in the future. When a company’s realized earnings exceed expectations, it is often a positive sign for investors and leads to an increase in the stock price. On the other hand, when realized profits fall below expectations, stock prices tend to decline as investors believe that the company’s future prospects may be challenging. Overall, realized and expected earnings play a crucial role in determining investors’ perception of a company’s financial performance and can significantly affect the movement of the stock price. Earnings reports are made available to the public to announce a company’s latest historical performance. Quarterly reports show the last three months, while annual reports provide a snapshot of the last year. These reports include comments from the company on initiatives and projections going forward. EPS, or earnings per share, is one of the most crucial metrics that can influence stock price movements in the short and long term. During quarterly earnings announcements, analysts create a consensus estimate for a company’s earnings per share, which represents the sum of its net profit divided by the total number of shares outstanding. A company’s actual earnings per share are then compared to the estimate. If the actual earnings per share are higher than the estimate, share prices are likely to rise as investors become more optimistic about the company’s future prospects. In contrast, if the company’s actual earnings per share are below the estimate, stock prices usually fall. Investors use other metrics and ratios in the earnings report, such as revenues, margins and P/E ratios, which can further influence stock price movements. Overall, understanding how EPS and other financial metrics can affect stock price movements is important for investors who want to make sound decisions in the stock market.

Systematic vs. unsystematic risk

Finally, stock price fluctuations are about the concept of risk. There are two types of risk, systematic and unsystematic. Systematic risk is an event that can affect the stock market as a whole. Unsystematic risk is specific to the company or industry. Beta is the measure of the volatility a stock has in comparison to the market as a whole. A beta greater than 1 represents a stock that will move higher than the market in periods of growth but decline more in periods of decline.

Systematic risk

Systemic risks include events such as war, interest rate fluctuations, recession and geopolitical events. These events tend to affect all stocks regardless of company-specific performance and growth prospects. Systemic events are seen as disruptions to the market and generally cause a downward price bias.

Unsystematic risk

Unsystematic risks include company or industry-specific events. For example, companies producing radios were at risk when televisions became popular, or companies growing and selling vegetables are hit by droughts or hurricanes that destroy their harvest. These risks can have a major impact on a stock, often causing sharp price declines.

About the Vikingen

With Vikingen’s signals, you have a good chance of finding the winners and selling in time. There are many securities. With Vikingen’s autopilots or tables, you can sort out the most interesting ETFs, stocks, options, warrants, funds, and so on. Vikingen is one of Sweden’s oldest equity research programs.

Click here to see what Vikingen offers: Detailed comparison – Stock market program for those who want to get even richer (vikingen.se)