What Makes Stock Prices Go Up?

Author: M.Farouk Radwan
investors reflect future earnings expectations of a stock in its price immediately.As soon as any piece of news is released investors respond with either buying or selling the stock to reflect this new news in the pirce. In this article i will explain what makes a stock price go up and how you can take advantage of such information to make good profits.
What makes stock prices go up?
At any point of time the price of a stock reflects all the future earning expectations this stock can bring you. For example, if Western union use to distribute 1 dollar/year as dividends, then this fact is going to be priced already in Western Union's stock price. Now if the management announced that they will increase the dividends to 2 dollars next year then Western Union's price will move up to reflect this new change in the future earnings expectations. Even though investors haven't received any of these dividends yet the stock price will still go up because the price always reflects the future earnings of a stock.
There are lots of factors that can make a stock price go up, here are some of them:
Future earnings expectations increased
A commodity that directly affects the company's stock went down in price, for example a company in the steel industry (energy intensive industry) its price might go up when crude prices go lower because of the reduced energy costs
When the company beats the expectations its shares rise, for example if at the end of the year Western Union announced that it made more profits than what it expected earlier then its stock price will go up
When interest rates go down most stocks go up, see my article why do stocks do down when interest rate rise
When the company announces that it will buy back its shares its price goes up
When analysts upgrade the stock and give a better recommendation on it
When analysts upgrade the whole sector within which the company operates
When another company announces an offer for buying your company, usually such offers add good premiums to the current price
When people are afraid, when everyone becomes afraid and when people start to dump shares at unreasonable prices then this may be a signal that shares will rise on the medium term
When the whole market goes up, even though this is not a rule still a stock is more likely to rise if all other stocks are rising
When a company in the same sector reports unexpected profits
Final words
Making the right choice from the beginning is what will make your stock deliver good news for you. Buying stocks that have strong competitive advantages ,creditable management and good value compared to their price are the key factors in making the right selection.
Article Source: http://www.articlesbase.com/investing-articles/what-makes-stock-prices-go-up-579593.html