What makes a Stock rise after posting a bad result?

One of the students of the first batch of Pro Stocks Trader asked a question yesterday.

His question was

" A big steel company has announced its quarterly results which shows fall in revenue and a huge fall in profit. Then why is its stock price increasing? It should ideally fall"

My response was

" That is the difference between Fundamental analysis and Technical analysis. Technical analysis tells you to look at Price action and then make your trading decision without thinking much about Fundamentals.

Cut out the noise of news and other's opinions, focus on how Price is moving, and act based on your Trading rules.

Take the example of Cricket, if your favorite Batsman has scored less runs in previous 4 matches, you would expect him to score less runs in the 5th match also.

However, are you sure that 5th match will be a low scoring match for him. Not necessarily. He may play a good knock in the 5th match.

That's how Technical analysis helps you in making Trading decisions by acting on real action and not on opinion."

His response was " That's interesting!!! "

What's your opinion? How many times have you experienced this scenario?

Do share your experiences.

www.roitraders.com

Pro Stocks Trader - Online course on Trading in Stocks through Technical analysis