Selling the news is a common trading strategy in which traders buy a stock in anticipation of expected news, then sell once the event occurs. It's a short-term strategy based on the psychology that the unknown is frequently better or worse than the known. Once traders have time to interpret the news, they find that it won't mean much for the long-term outlook for the stock.
But sometimes news happens unexpectedly. In this case, traders may buy a stock after the news is announced. But in many cases, these still turn out to be sell-the-news events. Although many long-term investors don't concern themselves too much with short-term news, they can still use this strategy to take some short-term profits if a stock becomes overbought.
This week, investors received news about three stocks that moved each stock higher in the immediate aftermath. However, 24 hours later, it's a good time for traders to examine the stocks and decide whether to buy the rally or take some profits.
Activist Investor Starboard Acquires $1 Billion Stake in Pfizer
Pfizer Inc. (NYSE: PFE) stock jumped over 4% on Monday, October 7, on the news that Starboard Value, an activist investor, had accumulated a $1 billion stake in the company. That's not newsworthy by itself, but the company plans to use ...
