upgrades/downgrades

Discussion in 'Strategy Development' started by doug456, Oct 17, 2003.

  1. doug456

    doug456

    does anyone here enter/exit stocks based on upgrades/downgrades in the morning before the bell? seems like it would be a good way to pick up a few bucks?
     
  2. kowboy

    kowboy

    I cannot speak for everyone here, but from the previous comments on ET, I have concluded that the common belief is that trading upgrades/downgrades do not produce results of a consistent nature. I did try this early on in my trading, but with only mixed results.

    In fact, some have postulated the theory that they believe that some of the analysts upgrades/downgrades are traded contrary by the analyst's firms. IE, they are selling while giving an upgrade.

    While this may or may not happen, I personally do not believe trading the news or upgrades/downgrades is consistent in any meaningful way.
     
  3. With some core stocks that I know well and have been following for some time I have mental entry levels. If by chance an analyst comes out and dumps on one I often use that opportunity to take a position counter to the recommendation. 80% of analyst recommendations are wags or just playing catch-up with the existing price action, but on occasion a recommendation change will in fact contain new information. If I recall correctly, EDS' break in Sept. '02 followed a negative analyst report that presented significant new information. If you cannot decipher between the wags and the genuine new information, I would think that simply trading on rec. changes would be hazardous.