Since it is my belief that the news is irrelevant, why would you assume that I even knew about it? Actually (according to the time stamp on the news) it hit 5 minutes before the closed but, that's irrelevant too. Ok, let's have some fun. What did the news say? Did it say that the companies earnings were exploding? No, it did not. Is it possible that people will read that from this news release? Of course they well! What is the truth about the news release? Well, it says that the company is entering into production, right? What happens when a company enters into production? Do they put money in the bank immediately? No. Do they take money out of the bank? Yes, or they borrow it, in either case starting production is a liability, not an asset. So, what does the public read in the news? Do they see dollar signs or risk? Many of them see dollar sign, right? What's the reality? The reality is huge risk, right? RIGHT! They are spending money and they don't know what the critics will say about the show or even if anyone but a handful of share holders will watch it if it even gets released, right? Right! So, is that a reason to buy or sell the stock? Anything can happen! But, here is one possible scenario: Actually, before I give that to you, lets first consider why the news was released just before the close. Well, to get people to buy the stock, right? So, when are they likely to buy? The next day, right? So, what is liable to happen today when the market opens? Well, one scenario is that all the naive investors, the wishers and dreamers are going to mortgage the house and put all their money into the stock. So, what does that mean? Well, these people typically buy at the market because they don't know any better and they are afraid that if they don't buy immediately the price will go sky high. So, what is the smart money doing? What are the market maker's forced to do? When you have buyers that are willing to pay any price to get the stock and the smart money knows the price is about to go up for the wrong reason, they are going to sell at a nice high price and market maker's will also have to sell to make a market so, what happens to the price? The market COULD gap open tomorrow, and run up and then immediately hit resistance at the 50 day moving average and drop back down filing the gap and close lower on the day. That's one scenario. The market could run up for several days and then hit resistance where all the smart money has decided that this rally might go and then it will fall back down again. Why run up and then fall back down? The company has no revenue. They have an expense and risk. Naive buyers are willing to pay anything because of a news article they think means the price will go up. Does the price go up? Sure because smart money know that naive buyers are willing to jump in. After smart money takes profits and the naive investor runs out of short-term capitol to buy with what happens to the price? Now a really shrewd technical analyst, who just bought at support, and still has those shares will be able to sell them when he/she sees that the market is running out of steam be that tomorrow or early next week. So, what relevance did to news have to the technical analyst? None whatsoever.
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