The million-dollar question. You find a stock, it has good news, you expect it to run, and to your surprise, it dumps following the news. What gives?

The answer can be complex in nature, but it normally comes down to one of these 3 reasons good news leads to stock crashes: 

1. Market Expectations

This one might sound obvious. But if you were an investor already in the stock prior to the "good news," were you expecting better results? Be it better financial results, better closure rate of their sales pipelines, that Amazon deal they were supposed to close and didn't? It's one of the intricacies that makes stock trading both so beautiful, yet so painful, for the beginner. Simply buying good news is no sustainable way to succeed in the markets. You need to understand the bias of the investors, traders, and options traders are who are currently in the stock. What news releases and PR's has the company fed the current holders leading up to this "quote-on-quote" good news you're seeing today? Did they set the expectations higher than what they delivered?

The reality is, if the news doesn't meet expectations, what seemingly may appear to you, the outsider looking into stock for the first time, as good news, can actually be disappointing news leading to a wave of impatient sellers who just want to take the little profit they've made (or big in some cases) and move on, as the company is no longer hitting targets on their timeline. So what's the motto? Simply buying good news, does not lead to sustainable stock trading success.

2. Short-sellers

Short-sellers are an interesting breed of traders. I can speak from experience because I love shorting stocks. Especially stocks that publish 'bogus' positive news, which is evident is nothing more than a pump (something that occurs often in the micro-cap / otc markets). The thing is, there's a reason the majority of the small-cap and otc stocks are exactly that, "small-cap" or "otc." They have a long way to come to prove themselves and to hit wall street's institutional buyers. Most of these players, even though they seemingly have fantastic news, have no cash. These companies heavily rely on posting about everything and anything, to create a market perception that the company is onto "fantastic" news so that buyers believe the story, and when they get the stock price up 100, 200, 500+% they do what most companies do who have no money, and that's a dilutive stock offering, by issuing a ton of shares at a lower price to raise capital into the company. So short-sellers, especially big short-sellers, often target these micro-caps that seemingly have nothing going for them, anytime they pump good news. Just remember that it takes a lot of work for a public company to actually make it and that most of them don't. It's why shorting is a very successful strategy, when done meticulously.

And when you have big shorts piling into good news, it can be extremely challenging to buy up the price of a stock where you have shorts and profit takers putting selling pressure into a stock. Yes, even when the news is good.

3. The exchange being traded

One of the major things that need to be considered is where the stock is being traded. Is it one of the mega-corporations like $TSLA, or $MSFT, or $GOOGL, or is it an OTC stock like $MDMP and $LTNC? See, there exists a time inefficiency in how the market reacts to news in the OTC segment. In that, the news could be released today, and the stock doesn't actually take off until days, or sometimes weeks from now, simply because no one takes notice. One of the most profitable ways to succeed and be early in the OTC market is to be a fantastic news sorter. This is where relying on premium services like Breaking News tools, can be extremely helpful letting you add those hot multi-day OTC runners to your watchlist, and just jump aboard the action when volume starts piling into the stock. The nice thing about these news runs is that 99% of them are absolute pumps. The 1% that does not pump and are legitimate news articles about something positive is the legitimate companies trying to make it. But all the noise you see on social media usually is a result of the news being a pump. 

Think of the other side of the equation. If you're a stock promoter, and your job is to drive volume to stock, and you get paid and incentivized with shares, wouldn't it be in your best interest to hype up the market bias by releasing a tasty article or PR, and dump your shares into the buying pressure that you've generated? This is why oftentimes, the beginning ramp-up of a pump, has a lot of volatility in it. There exist a lot of inside interest to dump shares into your buying intent, which seemingly was the peaked cause of the news. Yet again, why shorts tend to win until they get squeezed.

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