Reading Charts Right After News and Data Releases: First-Bar Distortion, Wider Spreads, Retracement

Why charts behave differently right after a release

Corporate earnings, economic data such as consumer prices or employment, and policy announcements such as interest rate decisions often come out at scheduled times. Ahead of that time, many participants pull their orders and wait, then react all at once the moment the numbers appear. The first few minutes after a release are therefore an entirely different market from usual. While waiting orders rush in, those who were quoting prices step back to avoid risk, and automated trading programs place orders as soon as they read the numbers. As a result, price swings widely up and down in a short time, and supports, resistances and indicator signals that would normally mean something work poorly. What the market reacts to is also often not the number itself but its difference from what was expected, so it is not rare for price to fall on good news or rise on bad news. This guide does not cover how to call direction from a release. It sets out how charts get distorted right after a release, how the price on screen and actual trading conditions diverge at that moment, and how to view the retracement after the first reaction.

Signals that identify this situation

The stretch right after a release differs from other market situations in that its timing is set and can be known in advance. If you check the economic calendar or a company's earnings schedule, you can tell which bar on the chart is the one right after the release. Unscheduled news cannot be timed in advance, but what it leaves on the chart is similar. Typical signs are a single bar on a short timeframe suddenly growing several times longer than the previous bars, volume spiking in an instant, and long wicks left on both sides. In the order book, the size near the best prices shrinks visibly and quotes change so fast that the screen is hard to follow (see the Reading the Order Book guide). The clues below tell you that the bar is a reaction to a release rather than ordinary supply and demand. The reason to identify this is not to call direction but to judge whether indicators and signals calculated from that bar can be read as usual.

• The bar's time coincides with a release time on the calendar
• A single bar suddenly grows much larger than the previous bars
• Volume spikes in an instant to several times normal
• A bar with long wicks on both sides
• Size near the best prices shrinks and quotes change rapidly

First-bar distortion

The first bar after a release looks as if it holds a lot of information, but in fact it is the hardest bar to read. In the few seconds after the numbers come out, price often jumps one way and then swings hard the other way as orders from those who read the details more carefully and profit-taking on the first move come in. So the first bar often leaves long wicks on both sides, or ends up with a body whose direction explains almost nothing of the movement within it. This one bar distorts the indicators that follow too. Indicators that use range, such as ATR or Bollinger Bands, carry this bar's large range in their averages for a while, making volatility look high even after the release has passed, and values such as RSI or moving averages are pulled strongly by this bar's close. Some people use the first bar's high or low like support or resistance, but those prices may have been filled briefly at a moment when the order book was empty, so it is hard to see them as places where as much trading accumulated as at other levels. So rather than drawing conclusions from the first bar, it is commonly recommended to watch where the next few bars close after it.

Wider spreads and slippage

The spread is the difference between the highest price buyers bid and the lowest price sellers ask. Normally market makers and participants who quote tightly keep this gap narrow, but just before and after a release they pull their orders or widen their quotes to avoid being caught by sudden moves. So the order book thins and the spread widens well beyond usual. A market order placed at that moment can fill not at the price seen on screen but at a much worse price, skipping empty levels. The difference between the expected price and the actual fill is called slippage, and stop orders also tend to fill worse than their set price for the same reason. Charts usually draw lines through filled prices, so how wide the spread was does not show directly on the bar. A single long wick is sometimes made by only a handful of fills. When looking at bars right after a release, it is more accurate to consider how much actually traded at those prices and how empty the order book was at that moment (see the Trade Flow guide).

Retracement: how to view what follows the first reaction

Part or all of the first move after a release is often given back afterward. The reaction in the first few seconds is closer to a reflex to a headline or a single number, and the interpretation changes as details, other numbers released alongside and the speaker's explanation follow. Also, positions piled up on one side in anticipation before the release are unwound once the result is out, so price sometimes moves the opposite way even when the result matches expectations. This is often described by the saying 'buy the rumor, sell the news'. So rather than the direction of the first bar, many people watch whether, after the first move stops, price returns to its pre-release level or keeps closing above or below it. Using the pre-release level as a reference line and checking whether closes continue above or below it is the same idea as the confirmation conditions for filtering false breakouts (see the Breakouts vs. Fakeouts guide). That retracement is common is not a rule either, though, and the first reaction often continues for a day or more. Expecting a retracement in advance and judging against the first move is just another guess.

Common misconceptions

Misconceptions when looking at charts right after a release come from loading too much meaning onto movement over a short time. First, treating the direction of the first bar as the market's conclusion. As seen above, the first bar mixes a reflexive reaction with its retracement, so it often says little about direction. Second, simply assuming that good numbers mean a rise and bad numbers a fall. The market reacts to the difference from expectations and the explanation that follows, so the quality of the result and the direction of price often disagree. Third, believing orders will fill at the price shown on screen. When spreads are wide, fill prices can slip a great deal. Fourth, reading indicator signals right after a release with the same weight as usual. A single first bar may have shaken indicator values considerably. Below are typical thoughts that shake judgment right after a release.

• The idea that the first bar's direction is the market's conclusion
• The simplification that good numbers mean up and bad numbers mean down
• Believing orders will fill at the price on screen
• Reading indicator signals right after a release with the usual weight

What looks different in crypto and stocks

Crypto trades around the clock, so it meets the moment of releases such as US economic data or interest rate decisions head-on. In Korean time these often come out at night or early morning, so you may wake up to find a single long wick left on the chart. News about exchanges or projects comes without warning and spreads quickly through social media, so price can move first even on news that is not true. In January 2024, the social media account of the US Securities and Exchange Commission was hacked and a false post claimed that spot bitcoin ETFs had been approved; price moved sharply and then reversed after the correction. Korean stocks often release earnings through disclosures after the close or during the session, so the reaction of large caps such as Samsung Electronics or SK hynix often shows up first as a gap at the next day's open. In US stocks, large tech companies usually report after the regular session ends, so the first reaction comes in trading outside regular hours, when volume is thin, spreads are wide and prices are easily exaggerated. Indexes often react first in the futures market to economic data released before the regular session opens.

On a live chart

Right after a release is the moment the bar in progress changes the most on a live chart. A single 1-minute bar can stretch upward within seconds, then flip downward, and by the close become a bar with a small body and only long wicks. So signals calculated on the bar in progress, such as RSI or moving average crossovers, keep switching on and off with each update. To confirm a signal, looking at least after that bar closes, and if possible at closed bars one bar length up, wavers less (see the Intraday Minute Charts guide). At moments when trading crowds in, quote feeds from exchanges and brokers may lag or draw bars with some fills missing, so bars for the same time can look different across platforms. The screen may also seem frozen and then catch up all at once. If alerts are set on the bar in progress, several tend to fire together right after a release, so it is good to recheck on what basis your alerts fire around release times (see the Alerts guide). Simply marking release times on the chart in advance makes sudden bars less startling.

A practical checklist

Checking the items below in order when looking at a chart right after a release helps reduce skipping steps when pulled along by fast moves. The key to the order is checking, before reading direction, whether the bar is one to which ordinary chart reading can apply and how far current trading conditions differ from usual. If any item is unclear, take the weight of that judgment down a notch. This list is not a set of rules telling you what to do but a collection of questions that are easy to skip within a few minutes. Because release schedules are often known in advance, a common approach is to write down answers to the earlier items before the release and check only the rest afterward. If the first bar closes and the next one begins while you are checking, run through your earlier answers once more to see whether any have changed, and after the release, compare your written answers with what actually happened to sort out what to check first next time.

• Whether the current bar coincides with a scheduled release time
• Whether the first bar has closed or is still updating
• How far the spread and order book size differ from usual
• Whether price returns to its pre-release level after the first move or keeps closing outside it
• Whether indicator values have been pulled hard by the single first bar
• Whether you have recalculated the range of loss allowing for slippage

Limits and disclaimer

All explanations of charts right after a release summarize prices and trades that have already happened, and they do not tell you in advance in which direction or how much the market will react to a release. The same kind of first bar and retracement sometimes disappears within a day and sometimes marks the start of a long move, and an interpretation that looks obvious in hindsight was, at the moment, one possibility among several. Remember too that right after a release, spreads and slippage can make the price drawn on the chart differ from the price at which you could actually have traded. With leverage, a few seconds of sharp movement can lead to large losses or forced liquidation. This guide is educational material explaining the misconceptions that easily arise when reading charts right after news and data releases and ways to check them; it is not a recommendation to buy or sell any asset, nor investment advice. Trading decisions and their results rest with each person.