Back to top

Image: Bigstock

3 Expectation Breakers Defying Negative Headlines

Read MoreHide Full Article

Expectation Breakers

Wall Street’s history is littered with instances of stocks and markets responding to perceived lousy news in a positive light. One of the simplest, yet most effective methods to identify a coming uptrend is to monitor the price action versus news. As Leonardo da Vinci once powerfully proclaimed, “Simplicity is the ultimate sophistication. While most investors focus on news headlines themselves, they should emphasize the reaction to the news headlines, which are also known as “expectation breakers”.

A recent example of an expectation breaker is the market bottom that occurred in mid-October of last year. On October 13th, the headlines read, “Inflation Readings Hit 40-year Highs!”. Despite the spooky headlines and the deeply red open, stocks rallied and finished firmly higher on massive volume – a clear change of character and an example of an expectation breaker.

Zacks Investment Research
Image Source: Zacks Investment Research

Since the key reversal day late last year, the S&P 500 Index ETF (SPY) is higher by xx while the Nasdaq 100 ETF (QQQ) is higher by a whopping xx – underscoring the value and power behind expectation breakers.  

Today in “Headlines Versus Price Action”

1.   Roku ((ROKU - Free Report) ). News: Roku has nearly $500 million or roughly 25% of its cash with the doomed Silicon Valley Bank (). Price Action: After the stock dove early last week, shares reversed strongly and gained more than 7% on the week. The strength is also spilling into this week after the company’s management said it expects to recover 100% of the deposits from SVB.

Zacks Investment Research
Image Source: Zacks Investment Research

2.   Alphabet ((GOOGL - Free Report) ). News: Google shares plummeted after the company’s “Bard” chatbot made an error in its first live demo. Price Action: Shares have recovered fully from the initial price shock lower.

Zacks Investment Research
Image Source: Zacks Investment Research

3.   UBS Group ((UBS - Free Report) ). News: Banks plummet as Silicon Valley Bank , Silvergate Capital (SI), and Credit Suisse () on the brink of failure. Price Action: After CS crashed last week, UBS agreed to purchase its largest rival for more than $3 billion with the backing of the Swiss government. UBS has now recovered all of its losses from the banking crisis.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

“Expectation breakers” provide some of the most robust and reliable signals. When a stock brushes off bad news, take notice. Remember, price action supersedes headlines.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


UBS Group AG (UBS) - free report >>

Alphabet Inc. (GOOGL) - free report >>

Roku, Inc. (ROKU) - free report >>

Published in