It is a core principle of technical analysis that when markets respond positively to good news, the prevailing trend is up. This simple rule helps frame how to approach markets over time. But what happens when markets react negatively to positive news? This often unsettles traders and investors. They position for a rally or decline based on headlines, only to see the market move the other way.
This usually means the news was already priced in. The move reflects the classic “buy on rumour, sell on news” pattern. An opposite reaction does not always signal a new downtrend.
At the same time, some stocks fall sharply on bad news. These stocks may already be in a downtrend or may be entering one. The depth of the fall depends on the broader trend in the stock and its sector.
Each quarter brings a 45-day results window. This period offers traders and investors opportunities to identify low-risk, high-probability setups.
The key takeaway is clear: the market's response to results determines how to read both the numbers and their impact.
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State Bank of India
State Bank of India reported results that exceeded expectations across key metrics. The stock opened with a gap up and moved to new highs.
The move reaffirmed an existing uptrend. Earlier, the stock had broken out after stronger-than-expected second-quarter results.
The ability to hold elevated levels ahead of third-quarter results suggested the market expected stable performance. When results surpassed estimates, the stock accelerated to fresh all-time highs. As long as the trend holds, the bias remains to buy on declines.
Waaree Energies
Waaree Energies had declined for 19 weeks after listing. The stock found support near the 0.618 Fibonacci retracement — a level derived from the Fibonacci sequence often used to identify potential reversal zones.
At that point, the company reported strong results and commentary. The stock formed a weekly green candle and broke above a falling trendline resistance.
The market's response signalled a potential trend reset from intermediate decline to uptrend. The strengthening signals supported fresh entries after the correction.
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Larsen & Toubro
Larsen & Toubro had corrected for three weeks before its third-quarter results. The numbers were received positively, despite mixed commentary in parts of the media.
The reversal occurred near the 38.2% Fibonacci retracement level and prior swing highs — earlier peak price zones that can act as support. The stock has advanced over the past few weeks.
On the monthly chart, the rise has pushed the stock to fresh highs. Such nested signals — shorter-term reversals aligning with longer-term breakouts — can point to stronger underlying trends.
The central point remains that investors with a working knowledge of technical analysis can improve their odds of identifying stronger stocks.
Future discussions can examine other forms of market response to results and their interpretation.
None of the stocks mentioned here constitute a recommendation to buy or sell. This outlines an analytical framework that investors can apply to market study.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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