The Contrarian Take on Analyst Ratings
Identifying a Bearish Signal From a Contrarian Perspective
Identifying a Bullish Signal From a Contrarian Perspective
By contrast, a stock that is outperforming on the charts, but mainly sports "sell" or "hold" ratings from analysts, would represent a bullish contrarian opportunity. As analysts gradually respond to the stock's positive price trend with upgrades, those research notes can draw new buyers to the stock, effectively perpetuating its uptrend.
In summary, the key to correctly identifying a contrarian bullish or bearish signal relies on a thorough analysis of the stock's price action within the context of the prevailing sentiment among traders and analysts. Whenever a strongly uptrending stock is lacking in "buy" ratings, or a declining stock still carries a glut of "buys," savvy contrarians can take advantage by betting that analysts will eventually be forced to capitulate to the reality of the stock's price performance.