When a stock is upgraded, it means that a market analyst's rating for a particular stock has improved. With a status upgrade, the stock's value will be on the rise. Once this occurs, the opportunity to make a trade opens and you must act on it quickly to secure a profit. If you trade on your own or use a broker, trades with stock upgrades have the potential to earn a fair profit and create long-term growth.
Analyst Terms and Methods
Learn analyst jargon and rating methods to understand an upgrade. Different firms use different rating systems that you learn by researching their website or speaking directly with an analyst. In general, a stock is rated as "sell," or avoid, "reduce," or underweight, "hold," or neutral, "accumulate," or overweight and "buy" or "strong buy." Use your market knowledge to decipher when to sell a stock based on current ratings and how the market is progressing on any given day.
Stock Rating Changes
Watch the market daily to monitor changes in ratings. Upgrades move the stock upward yet this does not indicate a strong buy. Analysts watch for changes in the stock throughout the day in order to initiate an upgrade. Use your own judgment on when to trade while paying attention to analyst opinions on the stock.
Stay in contact with your analyst. Analysts have different views on when to buy and hold stock. One analyst will initiate an upgrade where another will refrain. By watching the market and staying in contact with your analyst during market hours, you will pinpoint the time to make a strong move.
Watch Market Performance
Decide to buy stocks that benefit from an upgrade. If the market reacts positively to an upgrade, it may experience a surge and enter a higher profit margin. Measure the market’s reaction to the upgrade in real time, so it is important to pay attention to how the market is performing and acting on stocks that are clearly on the move.
Do Your Homework
Use a daily stock chart to calculate a stock's potential growth short and long-term. Since you are not privy to the reasons behind an upgrade, the stock chart will give you direction on how to proceed based on a stock’s history of performance regardless of analyst recommendations.
Make a Profit
Sell the stock to secure a profit. This is the most important step and one you will be comfortable with once you complete the trade process. Keep track of the profit margins and use what you learn from trading upgraded stocks for future investments.
Remy Boyd is a professional in the staffing and recruiting industry. She is the founder of RÉMY ORÉAN, a boutique communications firm that specializes in media content for the human resources, finance, and life and style industries.