Stock Trading at a Discount
Every quarter companies listed on the NYSE and NASDAQ issue earnings reports. Prior to the issuance earnings reports on stocks the stock market news is full of earnings estimates. Stock trading at a discount to earnings estimates are often profitable for both long term investing and as day trading stocks. In long term buy and hold investing one looks for stocks trading at a discount to future earnings, at a discount to their intrinsic stock value.
A long term investor does fundamental analysis to identify stocks which have the potential for strong and continued earnings. He then looks at price to earnings ratio as well as the ratio of price to projected earnings. He buys stock trading at a discount to future earnings for his stock portfolio with the expectation of profiting from dividends and stock price appreciation for a long time. A long term investor uses technical analysis tools such as Candlestick stock charts in order to understand and predict changes in market sentiment and profit from buying stock, selling stock, and selling short at optimal stock prices.
A day trader may well follow the same stock that the long term investor is watching. However, traders really don’t care if the stock is going to go up or down, in the long term. Using stock technical analysis, traders can successfully predict price movement and profit thereby. Stock trading at a discount to earnings estimates may appear to be under-priced. The earnings reports come out a stock may rise or fall in price depending upon how close estimates were to the actual reports. Traders watch market sentiment and take advantage of price fluctuations prior to reports coming out and the brief period of market inefficiency that can occur after reports are issued. Candlestick analysis allows traders to anticipate new market trends as well as market reversal. During periods of stock volatility traders using Candlestick charts can profit when stock trading at a discount to earnings estimates turn out to be successful and when estimates are wrong as well.
Traders know that fundamentals are important and that the market corrects for new fundamentals very quickly. Therefore stock traders use Candlestick patterns when dealing with stock trading at a discount to earnings estimates in order to accurately and profitably anticipate market sentiment. Stock prices follow patterns. These patterns are driven by stock and economic fundamentals and by market reaction to both fundamentals and to its own movement. Candlestick pattern formations do not care if they are generated by changes in commodity pricing, stock pricing, or foreign currency pricing. It is the price pattern that can predict the next movement in stock, commodity, or Forex price. As earnings seasons approach long term investors look for good deals and traders look for stock price movement and stock volatility. Both can profit by using Japanese Candlesticks to see the future by remembering the past. Using price patterns to profit in markets has been profitable for decades and even centuries. Stock trading at a discount to earnings estimates are no exception in technical trading of the stock market.
