Fundamental Newsflow can act as trigger but till market recognizes the fundamental through Price Action - fundamental newsflow cannot be of much help.
Let us take Bank of America stock as an example:
In 2015: after a long era of Quantitative easing - the market started talking about how Fed will now increase interest rates and which sector/stock will it benefit. Look at this July 2015 article
And it's not like Bank of America stock did not rally but then there was big upside resistance to encounter.
Will new Bull market start in Financials?
Bank of America on verge of major breakout pic.twitter.com/Ojm7L1EIoq
— Deepak Singh (@smarket) October 29, 2015
There was a hope of breakout but breakout never happened. That's why we say - Never buy before the breakout
US Fed did increase interest rates in Dec 2015 after a long long time but this is what happened to Bank of America stock. Sell the News action resulted in strong sell off from the resistance point. Fundamental newsflow did not help that much. Bullish theory but no major price gain in first 12 months.
Rise in Interest rates chatter started again by middle of 2016 and Bank of America once again made a recovery attempt
The Assumption once again looked very compelling
Will Large Banks drive the next phase of US Bull market - pretty interesting move in Bank of America stock?
— Deepak Singh (@smarket) July 19, 2016
But what market needed was confirmation
I remember I wrote this article just before US elections on how Large Cap Financials on verge of major breakout obviously hoping Hillary win (Perceived to be good).
Donald Trump won but market reaction was the same - Big Breakout and Price confirmation happened
So, a theory that started way back in June 2015 that it's time to buy Bank of America actually started working well only 1.5 years later in Nov 2016. I just wonder how many people would have persisted with the trade that long who entered early in the game. That's why it's so important to look at the Price Action before jumping in a new idea
Once a stock breaks out - multiple opportunities emerge.
Here's Bank of America emerging as BUY.
Will the Leadership come from Large Cap Financials/XLF and Bank of America again pic.twitter.com/1A2VAtDrDU
— Deepak Singh (@smarket) April 16, 2017
Here's what stock did from the base
Once a stock breaks out - then it offers numerous opportunities on the way up. Bank of America and Large Cap Financials doing the same and the bull market is very young in this sector
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers