Whether it’s a good time to sell or buy stocks or not is the confusion of every beginning investor. To understand the rise and fall of demand and supply, have to clarify the reason behind the rise and fall of stock price.
The only certain thing is that stocks are volatile which can rapidly fluctuate in price. People will pay more for a product or service if there is short supply. To understand what makes people like a particular service or product and dislike the other, read on.
- As soon as a company releases information about a management change or a new product, the investors are sure to react. Price of the stock depends upon their reaction. If the reaction is positive, the stock price will rise and if it’s negative, the price goes down. Stock price is the most important factor in determining its stock price. No company will survive without earnings since it’s the profit a company makes.
- Every year, public companies are needed to report their earnings four times. If the earnings are better, its stock price will rise. And if the company’s earnings are worse than what’s expected, the stock price will go down.
You wouldn’t buy stock from a company that’s constantly downsizing, would you? Publicly traded, large companies seek to develop and gain market share by consistently increasing revenue and earnings. Now you must be wondering how do they do that? The answer is simple. A good place to start is quality labor. No company can remain successful in the long-run without quality management. So when the CEO of a company steps down, some see it as a negative impact while other accept it as the much-needed change.
Analyst Downgrades and Upgrades?
Senior analysts of various firm everyday upgrade or downgrade securities. Strong upgrades potentially send the stock’s price through the roof. Similarly, strong downgrades can send the stock prices plunging.
Acquisitions and Mergers
You might have never heard news of a company buying any other company or companies or have decided to merge. Since these mergers allow the companies to maintain dominance or move into new markets, they have the ability to affect the stock prices. The market share elucidates to dollar affecting the stock price and in turn affecting a company’s bottom line.
Sellers and buyers should be cautious in these instances. The ultimate reason behind the stock prices going up and down is the no. of sellers and buyers relating to the law of demand and supply.