The 10 reasons why stocks go up and down on the stock market

The stock market is one of the most volatile markets on the market; after that of cryptocurrencies. This is because there are more than 10 different reasons why the price of shares on the stock market can fluctuate up or down.

It should be noted that knowing these reasons can be quite useful if you want to invest in the stock market . Since, it will allow you to easily identify if a cheap action that is in stock can rise and register profits; which certainly is what we all look for when investing.

1. News related to the action

The news has always been one of the main reasons why a stock can change its price on the stock market. Since, these highlight important information about news related to them or their main managers.

These news can affect both positively and negatively a certain action; This will depend on the novelty that has been presented. Clearly, a negative event will cause a company's share price to decline, however, it is not always worth relying on these reports alone.

2. Buy and Sell in investment funds

Investment funds are entities where investors who wish to avoid direct contact with the market deposit their money and trust. These institutions usually operate with large amounts of money, so their actions in the market usually mark changes in the price of a share .

When an investment fund makes the decision to buy a certain share, this causes an impact on the market. Since, the amount of money you invest is abysmal . What is translated, as a probably profitable action. It is summarized like this, since these investment funds must ensure profits for their investors; so they will seek profitability in the market.

On the other hand, when announcing the integration of a share in an investment fund, individualists or retail investors will want to have this same share. Therefore, considering the law of supply and demand, this raises the prices of it .

This same eventuality also occurs when an investment fund decides to sell a share ; it falls and a large part of the retail investors outside the fund decide to sell. Since, they stop considering the action as “profitable”.

3. Investor sentiments

Investors' feelings are part of the reasons that can change the price of a share in the market. Since, when investors feel FOMO or HYPE they act without logical reasoning. This means that they buy or sell without considering the really important factors; This eventuality can be seen frequently on social networks such as Twitter, Reddit or Facebook.

FOMO is an abbreviation of: Fear of missing out. This represents investors' fear of missing out on a “one time” opportunity to make some money; they often act on FOMO when they buy stocks that are not as profitable as they seem .

In addition, this is also coupled with HYPE, which is when they feel great euphoria for a certain asset; like the fever to invest in technology companies that occurred in the 90s or investments in Bitcoin during 2017.

These two factors are usually the main engines that move prices on the stock market and other markets in the world. For this reason, analysts evaluating price action often rely on sentiment indicators; as is the RSI.

4. Automated orders

One of the tools most used by investors and traders is the automated purchase and sale of shares or tokens . This serves to mitigate possible losses as much as possible using the stop loss at key supports; as well as to ensure profits with the take profit on resistances.

Traders will set up a buy and sell order with the broker. With the objective, that if the price reaches said margin, the operation is executed immediately; either to take profits or control losses .

This can have a great effect on the stock market and on the shares of a business or company. Since, if a large number of investors take buy positions in the market at a price of 90 dollars per share, it is likely that it will go up; above all, if the stock that the action has is low.

Here too the law of supply and demand and the battle between bulls and bears apply . Because, just as some will want to buy, another group of investors will sell to take profits and push the price down.

5. Strategies by the company

Companies may have multiple strategies to increase or decrease the prices of their shares on the stock market . One of them is the popular “Stock Split”.

This consists of making adjustments in the prices of the action ; exactly, it is a division in the value of it. That is, if the share initially had a value of 100 dollars, now it will cost 50. In this way, a group of investors will be able to access the company's stock and thus acquire market share; which will clearly increase its price in the long term.

Said strategy does not reduce the capitalization of the company . Since, if before a stock had a price of $100 and they have made a Stock Split in half, it means that now you will have 2 shares of $50.

6. Own or institutional purchases

Institutional purchases can be viewed as something positive in the market; since these investments are for large amounts of money, which is why they generate movements in a certain action on the stock market .

In addition, there are also companies that make their own purchases or company buybacks . This means that they take opportunities when their stock prices are low, in order to gain more dominance over them.

When this strategy is carried out, the action begins to rise almost immediately . Since, not only does it demonstrate the confidence of the company about its future, but the event attracts a large number of investors.

7. Social networks

Today social networks can move a market completely , especially when there are influential or world-renowned people involved; as presidents, important CEOs, among others.

An example of this has been the most recent event that is linked to Elon Musk, CEO of Tesla, SpaceX and Neuralink. This influencer and billionaire was manipulating the prices of some cryptocurrencies with simple tweets during 2021, the same can be applied to stocks, forex or other markets.

Therefore, it is important that a company has good public health so that it does not become involved in controversies that could negatively affect the price of its shares.

8. Environmental catastrophes and global disasters

Environmental catastrophes can affect prices in publicly traded stocks ; both negatively and positively. However, when it comes to causing conditions naturally, the following events can be included: plagues, hurricanes, tsunamis, earthquakes, global diseases, pandemics, among others.

To have a clear example, let's use the case of COVID-19. This virus caused one of the largest financial losses recorded in 2020 . However, some companies also benefited from it; such as recognized laboratories, pharmaceuticals, among others. Especially after they started developing and selling vaccines.

9. Global politics, regulations and conflicts

Worldwide, events occur that affect multiple actions on the stock market. Among these eventualities are changes in politics, wars, controversies , internal changes in the economy of a country , among others.

Each of these events can affect the performance of a stock in the stock market , especially if the company is located within the country in conflict. For this reason, large companies seek to have a presence in multiple nations; In this way, the possibilities of being affected in the stock market by the political or monetary decisions of a country are reduced.

However, there are also political, monetary or social aspects that can benefit a company , such as discounts for electric car companies, benefits for companies in the health sector or companies that use clean and CO₂-free energy, among others.

10. Company performance reports

In addition to all the points mentioned, it is also worth pointing out that a really useful aspect that experts use to evaluate a company are performance reports . These are generally delivered during each quarter and annually; They express the sales figures, achievements, expenses, among others.

The analyst or expert can make a future projection with this data . Since, if the figures are better than those of the previous quarter, it will translate as growth in the company. Therefore, it is possible that this will lead to an increase in the price of the shares.

In the same way it is applied if the yields are negative ; if this occurs, the price of the shares will fall.

extra reasons

One aspect that cannot be missed is the inclusion of a company in an index. The concept to explain it is quite similar to the aforementioned investment funds, with the difference that if a company is listed on a recognized stock index, it is almost 100% likely that its shares will rise .

It also happens if a company or company stops trading in the index ; if this happens their prices will drop. A sample of the power of influence that the indices have, was what happened with Tesla during December 2020; when it went public on the S&P 500. There the company marked a new ATH and generated huge profits in a matter of days.

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