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I am trying to understand why stocks go up and down. I've seen answers here in the forum and most of them talk about demand and supply.

My questions Are:

  1. Can we know the demand and supply from news?

  2. Can we predict stocks next day price using news? I've seen some research articles that said that it's possible, but is it realistic/precise (of course won't be 100%)?

  3. Simply, if I want to predict the next day, week, etc. price, what are the points that I need to look into? can we enumerate them?

I am a masters student, and I want to build a course project to predict stocks prices using the news. Almost I don't know anything about stocks, but I feel this is an interesting topic.

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    Your question will probably be closed, but for a class project suggestion, how about modeling "buy the rumor, sell the news," which is venerable Wall Street trading advice.
    – Orange Coast- reinstate Monica
    Nov 12, 2021 at 16:34
  • Thanks @OrangeCoast-reinstateMonica .. why it will be closed?
    – Minions
    Nov 12, 2021 at 16:42
  • Re #2, by the time you read the news lots of other players have already read them, analized them and reacted to them, altering the market. Your only hope is to be smarter than the other players. Re #3, if anyone knows the answer he will post it here.
    – SJuan76
    Nov 12, 2021 at 16:58
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    If anyone knows the answer to #3, they will already be doing it, making loads of money, and definitely won't post the answer here!
    – Simon B
    Nov 12, 2021 at 17:34
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    Two things control stock prices. 1) the price at which someone is willing to sell 2) the price at which someone is willing to buy.
    – DJClayworth
    Nov 12, 2021 at 21:29

2 Answers 2

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The answers would be:-

  1. Not reliably.
  2. Not reliably.
  3. If anyone knows the answer to that, then they aren't going to tell you.

The raw news doesn't mean anything unless you really know the business of the companies you invest in.

Suppose a newswire comes in to say that the Nationalist Party has won the general election in Elbonia. What does that mean to you? Probably nothing.

But suppose one of the companies in your portfolio is BigCorp, which exports a lot of stuff to Elbonia. And the Nationalist party have announced that they will be increasing tariffs on imported products.

Now you can predict that the price of BigCorp shares is going to fall.

But you're too late there. The professionals were watching the opinion polls. As soon as they thought the Nationalists might win, they sold all their shares in BigCorp, and the price has already gone down.

By the time you read the news, it's too late, and the market has already factored it in.

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Yes, the prices of stocks fluctuate because of changes in supply and demand. If there is high demand, share price rises. And conversely, excess selling volume drives prices lower. It really is that simple.

The release of news (good and bad) influences supply and demand. There's no way to have an idea what or how much that effect will be unless you know in advance what the news is and utilizing such information is illegal. Secondary reactions to the news can also drive price (financial news articles, brokerage firm recommendations, etc.).

Many claim that they can predict but these are just guesses. With enough guesses, someone will always be right :->)

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  • Thanks @Bob! but sometimes it's possible! For instance, a few days ago, there was news about TESLA CEO that he will sell some stocks to pay a bill. the next day, TESLA stock price went down around $200!
    – Minions
    Nov 13, 2021 at 0:16
  • Apart from the fact that it took 3 days for TSLA to drop $200, how do you know that a news story is going to be good or bad for a stock, enabling you to decide whether to go long or short? Have you ever seen an earnings announcement where the company handily beats analyst expectations (you then buy the stock) and share price abruptly heads south really quickly because forward guidance is lowered? Furthermore, what makes you think you can analyze the news and then get long or short before all of the more informed institutions and professional traders with better technology, better access?
    – Bob Baerker
    Nov 13, 2021 at 0:49
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    And if you're lucky enough to get on the train in the right direction, how do you know when the stock levels off to close your position to avoid a whipsaw, avoiding turning it into a losing trade? It's easy to look in hindsight and say you could have done XYZ but it's very different when you're in the trenches having to decide minute to minute. TSLA didn't drop $200 in a straight line down.
    – Bob Baerker
    Nov 13, 2021 at 0:53

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