How much stock can you put into the upgrades and downgrades of individual issues by Wall Street analysts?  Well it depends how you use the information.

For example, Well Fargo downgraded Procter&Gamble (NYSE:PG) this morning, noting that the company lacks near-term catalysts and they cut its earnings estimates through 2014. WFC lowered its price target range from $67-71 to $64-67. 

As a result, PG traded down almost a point on very little volume compared with the average daily volume of the stock.  PG made a premarket low of 63.32 just before the open, and just above major support at 63.29.  Low and behold when PG opened on the NYSE, PG never even traded below the premarket low nor the critical level of 63.29.  From there, PG has gone straight up and is poised to test the double top from last week at 64.75-64.76.

How should traders and investors interpret such actions from Wall Street’s brain trust?…very carefully.  First and foremost, do your homework and be cognizant of the price action of the issue in question relative to the more reliable data points derived from the daily sessions.  Obviously traders looking to cover shorts or initiate longs in PG capitalized on this opportunity to buy PG on major support and stepped into action right off the opening bell.

Longer-term WFC may be correct about the long-term direction of PG.  However, before acting on upgrades and downgrades of Wall Street analysts, gauge how their actions fit into your own assessment of the issues (technically and fundamentally) and act accordingly.  There longer term declaration for an issue just may provide you with a profitable short or long term trading opportunity.

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