Smart Guide to Share Analysis
Guide Index
- What makes share prices move?
- 2 Financial statements
- 3 Fundamental analysis
- 4 Technical analysis
- 5 Diversification
Checklist
- The number of buyers versus sellers can be affected by:
- company news
- general market sentiment
- speculation and rumour
- movements on international markets, particularly Wall Street
- economic events
- interest rates
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Tips
Research reports are only the view of one broker. And in the past brokers have been known to 'talk their book' – supporting a stock they own or have some other interest in.
1. What makes share prices move?
What you'll learn in this step: As in any marketplace, price is determined by supply and demand.
The Australian Stock Exchange is a marketplace and, as in any other marketplace, the price at which its goods (shares) trade is determined by supply and demand. If there are more buyers than sellers, then the price will rise; if there are more sellers than buyers, it will fall.
The number of buyers versus sellers can be affected by things such as company news and interest rate rises or falls.
Listed companies operate under the 'continuous disclosure' rules of the ASX, so they have to publicly disclose any information that might have a material impact on their shares.
These announcements include earnings upgrades ('profit is likely to be 15 per cent higher') and profit warnings ('profit is likely to be 15 per cent lower'). Stock analysts employed by brokerages also undertake research on companies and their reports can move the market too by changing their recommendations on stocks
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