How to interpret charts reflecting stock price fluctuations.
The new regulatory climate in Washington was one of the main driving forces for change that is currently taking place in a community of analysts specializing in stock analysis. These changes are a logical consequence of the exposure of abuse, which happened after the next “bubble” burst on the stock market in 2000. The rules of ensuring openness in the financial sphere, developed by the EC, regulate the flow of information between companies and analysts and, ultimately, the flow of information available to you as an outside investor or trader.
Some traders believe that these new restrictions, which prohibit selective disclosure of information to “friendly” analysts or key investors, actually create new obstacles to the flow of information to the general public. Rules for ensuring openness in the financial sector requireso that any information provided to analysts or key investors and capable of affecting the value of the company, was provided to the general public within 24 hours, even if this information was not part of the planned report.
Preference is given to the simultaneous disclosure of information to all interested parties, but sometimes during meetings with any of the analysts or institutional investors, the information is disclosed unintentionally. If, for example, analysts find out any important information during their visit to the company, then the company must publish a press release containing the same information and available to the general public. Some analysts believe that this beyond all reasonable measure makes it difficult to prepare their reports.
However, the Rules for ensuring openness in the financial sphere put an end to the use of some methods that put individual traders and small investors in a deliberately unequal position with analysts and institutional investors. Lawyers in many companies warn senior management about the need for caution when answering questions from individual analysts.Some companies stipulate that any contacts with analysts should be preliminarily evaluated and approved by the company's legal advisers.
The new rules also affect so-called road shows, which are marketing tours, during which the general public acquaints with new offers of securities of the company. The EC permits such events, indicating, however, that nowadays they should be oral proposals, which allows companies to avoid banning written or broadcasting proposals that go beyond the official prospectus of the proposal. The EC believes that these road shows should be open to all investors, and objects to holding two separate road shows, one of which is intended for institutional investors, and the other, more “combed” version of the road show, for small investors. In addition, some lawyers advise companies to take special care when it comes to attracting outside analysts to participate in road shows, i.e. analysts who are not involved underwriter of the proposal.Some experts believe that the inclusion of third-party analysts may be perceived as selective disclosure of information, which is contrary to the Rules for ensuring openness in the financial sphere.
The most significant regulatory changes you will have to face as an individual investor or trader relate to the disclosure of information that should be presented in research reports. Including dealer firms engaged in trading securities, must report any remuneration they receive for providing investment bank services to the client company within three months after the public offering. In addition, firms that are members of the New York Stock Exchange or the National Association of Securities Dealers,
must report when they stop publicizing a publicly traded company. Very often, news of this kind create a negative information background for a company and may lead to a fall in the price of its shares. In addition to these large disclosures, analyst research reports these days should include information about the relationship between analysts, underwriters, and the issuer of shares.
The need to act in such an environment causes an increased nervousness of many companies and analysts, but such an environment undoubtedly increases the chances of individual investors and traders for success. Familiarizing yourself with the research reports of analysts, pay special attention to these “disclosures” and try to use your newfound access to important financial information by taking part in conference call sessions that highlight the performance indicators of the companies you are interested in. Taking part in such conferencing sessions, you, in fact, part with the role of a passive observer, awaiting information from intermediaries, and become one of the insiders who join the most recent financial news.
You learn how to read and interpret charts reflecting stock price fluctuations. We describe the benefits that can be derived from the analysis of diagrams, but do not forget to point out the weak points of such an analysis. We will introduce you to the basics of building stock price change charts, and then show you how to identify trends that lead to profitable trading results.In addition, we will talk about trends, how they can be identified and why they are so important to you. Then let's talk about how indicators and oscillators, obtained by computer methods, can expand your analytical abilities.
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