R.N. Elliott in his work Nature’s Law, comments “The news fits the market and not the market to the news.” Elliott adds “to the same events, the price has reacted differently.” In this article, we will review some news and how the price reacted to the same headline. In particular, we will see the case of news about job cuts.
Jun. 27, 2019 – Ford will cut 12,000 jobs in Europe
Last week, Ford (F) announced the elimination of 12,000 jobs in plants located across Europe by the end of 2020. The cutback is part of a cost reduction plan. The objective is to develop the production of vehicles which are friendly to the environment. From a technical point of view, the price made a bullish gap of 1.31% and closed the session earning 2.93%. However, June 27 euphoria declined in the next two sessions.
As can be seen in this case, the cost reduction plan does not seem to accelerate a new upward impulsive movement.
Sep. 25, 2018 – Novartis will reduce 1,000 jobs
The pharmaceutical company Novartis AG (NOVN) announced on September 25, 2018, the reduction of 1,000 net jobs in four plants in Switzerland. This decision responds to a plan to reduce jobs over a four-year span.
On the other hand, the shares of NOVN reacted with a modest bullish gap of 0.29% and closed the session gaining 1.69%. Two days later, NOVN exceeded previous highs (73.95) triggering a second bullish impulsive move. The bullish cycle still remains and is in an exhaustion zone. The price could reach a new marginal high at 93.31 level.
Jun. 28, 2019 – Deutsche Bank could cut over 20,000 jobs
This Friday, June 28, Deutsche Bank (DBK) announced that it could cut over 20,000 jobs. This occurs in the midst of an ambitious restructuring plan of the German Bank. This plan will be announced on July 7 at the shareholders’ meeting.
In the daily chart of DBK, we observe a downward diagonal, it could be a terminal pattern of the bearish cycle. The day of the announce, DBK opened with a bullish gap of 3.95%; however, DBK closed with a 3.32% advance. As long as the price does not surpass 7.93, or begin to develop a sequence of higher highs and higher lows, the bearish bias will remain.
Jun. 27, 2019 – BASF will reduce 6,000 jobs
The German company BASF (BAS), declared that it will reduce 6,000 jobs worldwide. The area involved will be its central administration. This cut is made in the middle of the modernization process.
In the session of June 27, BAS opened with a shy bullish gap of 0.64% and closed the trading day with gains of 1.55%. However, the long-term structure remains bearish and shows no signs of a bullish reversal. The target area of the bearish cycle is between 52.02 and 46.94. The invalidation level of the bearish trend is at 74.57.
In the previous examples, we saw how each announcement in the news was accompanied by a bullish gap. Despite this, job cutting decisions don’t ensure that the trend of the gap will remain over time. In contrast, despite the announcements or the projections, the trend prevails over the mediatic factors.