Why Just Chasing the News Is Not A Good Stock-Picking Strategy
In the age of digital domination and social media trends, the spread of stock news has no limits. Nowadays, we all come across news related to shares and stocks via websites, social media, etc.
If we check the statistics, companies that share their earnings post-market closure are likely to see a price jump in most cases. While looking at the bigger picture, daily investors have their total money invested around 53% higher this year.
Such trends show a clear picture that stock prices and news don’t move in parallel every time.
What Chasing the News Means in the Stock Market
Chasing the news simply means to take action (buy or sell) based on a popular news headline. The viral news could be anything from a company’s profit data to business dealings or more. By the time the news reaches investors, the stock price will have already gone through a significant change.
In such a scenario, the news information has already reached numerous people like you, without being an early tip anymore.
| Stage | What Happens |
| Event | Something changes at the company or sector level |
| Early reaction | Institutions and traders react first |
| Headline | News platforms report the move |
| Public Attention | Retail investors notice the stock |
Why Stock Prices Often Move Before News Is Seen
Rather than moving because of the news headlines, the stock prices react to information. The big-scale traders usually keep a keen eye on the reports, leaders’ talks, and sector-wise data in real time. Once things shift, the stock price also moves softly.
Later, the same change reaches more people via news sources. This makes it seem that the news made the stock shift. While the reality was that the change came early, before you read the news.
How Headlines Present Partial Information
The majority of stock-related news or stories check just one flashy angle rather than covering all the facts related to the firm. For example, the news might highlight the profit boost, but it lacks the details of low sales or more debt.
Timing Gap Between Market Action and News Coverage
| Activity | Typical Timing |
| Price movement | Immediate |
| Analyst reaction | Same day |
| News article | Hours or days later |
| Social media spread | After publication |
Why News Focuses on Sharp Price Moves
Media interest also increases in the stocks going through faster price changes. Any stock having a 10% price movement will catch more attention than one with a 1% price movement.
Because of this reason, the stocks in the news are extreme cases instead of slow gains or small shifts. In one way, this creates a false view where only high price movement looks more relevant.
Short-Term News Versus Actual Business Performance
A company may have one good phase in the news, even if its long-term sales trend remains the same. However, another one may face a certain event in the news, while the main work remains firm.
How News Cycles Create Emotional Reactions
| News Cycle | Common Reaction |
| First headline | Surprise |
| Follow-up articles | Excitement or fear |
| Social media | Reinforcement |
| Late coverage | Emotional response peaks |
Examples of Stocks Moving Before Major Headlines
There are multiple examples showcasing the shift in the stock prices before the news was openly discussed. The majority of firms, such as Reliance Industries, saw a price shift before the news came out. By the time the news went out, stock prices had already adjusted completely.
On similar lines, Paytm’s price shifted after the listing showed early market views. Later, the drop came in the news, but price action had already signalled it.
What News Does Not Show About a Stock
News coverage remains completely free from internal execution quality, operational speed, or long-term fund plans. In some cases, it also misses the current position of various market players.
The shares or stock-related news hardly includes which stock entered early, exited only, or how the market shifted before the news. However, such factors remain away from the public reports but can still impact prices.
Conclusion
News is merely just a part of the market data information, but it mostly comes across after the prices shift. These stories summarise the known facts rather than giving early investment tips. Getting to know how these things work will explain how both stock prices and news are out of synchronisation.
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This analysis is for informational purposes only. Please consult a SEBI-registered financial advisor before investing.
– Chandan Pathak
Equity Research Analyst, StockYaari