Looking at Analyst Upgrades

Looking at Analyst Upgrades

Every once in a while, you will see in the financial news that a company has been upgraded in rankings by a major financial institution. What you might not know is exactly what this means for short term traders.

The latest major company to be upgraded is SPX Corp. They might not be a household name like Apple and Google are, but they provide a very important service supplying industrial equipment for heating and ventilation systems and more. Credit Suisse—one of the world’s largest and most trusted credit rating companies—has upgraded SPX from a neutral company to an outperform. What this means is that they expect the company to perform at an above average level in the coming 52 weeks. The long term expectations were improved for the company because SPX has begun to shift their focus toward less volatile markets, therefore increasing the chances of steady profits for the company.

The short term impact was much more noticeable for the company. Credit Suisse announced the upgrade on Monday, March 28th, and the stock was up by more than 0.5 percent at one point, and finished the day up by 0.35 percent. The stock market typically rises—on average—by 3 percent per year. For the year 2016, it is not expected by most analysts to go up this much, which indicates that SPX still has a lot of growth ahead of it.

Also, keep in mind the fact that the 3 percent or so in predicted growth that the company has been given is not necessarily going to be steady, and it’s not going to be constant. This is growth that is expected to occur over the course of a year, and that means that there is plenty of room for the normal ups and downs that every single asset experiences. There will be days where the stock drops, and there will be days that it is seeming to improve at a rate far faster than what the analysts expect. This is normal, and the overall picture needs to be maintained despite what the minute data says.

In other words, paying attention to a major upgrade like this serves two purposes, that are completely transferable beyond this one company. First, a major upgrade from an institution like Credit Suisse has the potential for easy predictive movements over the course of the next trading day or two. Most binary options brokers do not carry SPX Corp., but they do carry the big household names like Apple, Disney, Amazon, and the like. If you find that a company like one of these has received a huge upgrade like SPX just did, then there is potential for that company to have the same quick and easily predictable movement that SPX underwent.

The second purpose that paying attention to upgrades (and downgrades, too, for that matter) is important is because they serve as a way of more accurately predicting long term trends. These are the general things that you need to be paying attention to as you formulate short term trades, even those as short as 60 seconds in length. Short term trades have a higher likelihood of success when they are done under the umbrella of a long term trend, and when an institution with far more experience and research power than what is available to the general public makes that prediction, they not only have a better chance of being right in their status change, but they also are able to attract others that are willing to trust their judgment and invest immediately in the company, which gives the stock price an immediate bump. This is the biggest advantage of using this concept in your binary options trading.

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