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Strategies & Market Trends : Evaluating Rumors and News Along With T/A and F/A
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To: Susan Saline who wrote (4)9/18/1998 4:24:00 PM
From: Wayners  Read Replies (1) of 141
 
As I understand it, news of upgrades, downgrades and analyst comments for that matter get released to the brokers in the house about 30 minutes before the rest of the world gets it. At least this is true at Merril Lynch.

The hard part is figuring out how the market will react after the gunslingers take the price in the obvious and expected direction. Upgrades and Downgrades don't have much of a lasting effect. My experience is the effect lasts about 2 to 3 days and pretty much all of the trading opportunities are over as soon as the stock gaps up. I think what happens is the short term buying/selling ammo gets used up quick and when that happens you get a reversal against the origianal news/price move. Just takes a few days to run the cycle.

If you have ever gone and looked at the long term effect on price by analyst upgrades/downgrades you will see that the vast majority of the records are horrendous. I encourage everybody to go to briefing.com, pick a stock and look at when various houses came out with upgrades and downgrades. The upgrades and downgrades invariable had the effect of actually causing the selling climax or buying climax resulting in a short term top or bottom. Look at GTW for example. Guys downgrading the stock, causing the stock to tank over the next few days, creating a short term bottom--stock then goes on to double during the next year--and the analyst leaves his downgrade in place. Simply classic example.
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