Investing in the stock market is all about understanding the trends. If you can do this correctly, you can put your money in the right time, and take it out at just the right juncture. This allows you to gain from the price swings. Simply put, you must invest your money just when the stock’s price is beginning to climb, and sell it off when it has begun to go down. This is known as “market timing”. Of course it is not easy to do this, and even the experts fail often.
But that’s what we are trying to do here. Mentioned here are 7 signs that will tell you when the price of a stock may be on the verge of a fall. Watch out for them.
Symptom # 1 – Failure to issue revised earning guidelines
Many publicly traded companies, when they anticipate a poor return due to adverse market conditions, often issue forecasts about lower earnings over the short time. read more These companies often take the trouble of providing a revised guideline that reflects better income. This is a common practice, indicating the company’s genuineness in the eyes of its stockholders. However, when a company fails to or misses out on issuing the revision, it becomes evident that it is unable to provide a new projection about the future earnings. This is indeed a bad omen, and is viewed adversely by the analysts.
Symptom #2 – Sudden spurt in insider selling
Watch out for what the insiders of the company are doing. Of course you should ignore normal purchases and sales. But does it seem that there is suddenly a lot of selling pressure? Does it seem like a flurry of panic selling? If you see such a thing, it is time you started to worry about the company too. Insiders always have more information about the business, and they have the information first always. Perhaps they know something that is making them worried. Take note, and act now.
Symptom # 3 – Discontinuation of financial forecasts
Businesses issue quarterly or annual financial forecasts to keep the investment community happy. These forecasts also reflect the company’s financial resources as well as their potential strength in manipulating the business hazards. But if this is suddenly stopped, then it will naturally raise eyebrows among the investors.
Symptom # 4 – Withdrawal of dividend payment
Withdrawal of payment of dividend without citing any valid reason probably ranks at the top among all the symptoms that indicate an imminent corporate disaster. No sensible dividend paying company will do this, and so, if the company is doing it, this means that there is an immediate serious financial crisis.
Symptom # 5 – Halt in the repurchase of stocks
When a company that normally repurchases its stocks suddenly stops doing this, it may either mean a non-availability of funds, or worse still, it has lost its faith on itself. This is not good.
Symptom # 6 – Lack of innovation
The prosperity of a company largely depends on its ability to develop new products and ideas. In other words, it must always look ahead to survive in a keenly contested commercial world. If this spirit is lost, it may already have started to slide down.