Investing in stocks requires an understanding of the various factors that affect stock prices. These factors may be intrinsic to the company itself or part of the external environment.

Investing in stocks requires an understanding of the various factors that affect stock prices. These factors may be intrinsic to the company itself or part of the external environment.

Internal factors relate to the company itself, such as an announcement of poor or favorable earnings, earnings that are more or less than expected, major layoffs, labor problems, new products, management issues, and mergers.
External factors relate to world or national events, such as the war in Iraq, the Asian currency crisis, weather conditions that affect sales, the Fed's adjustments of interest rates, and employment figures that were higher or lower than expected.
By analyzing these factors, you will often learn a lot about why a stock did well or why it did poorly. Being aware of these influences will help you anticipate future stock movements.

Method:

Step 1 - Choose a common stock that has experienced considerable price fluctuations in the past few years. Here are several examples (but there are many others): IBM, J.P. Morgan Chase, AT&T, Amazon.com, Oxford Health Care, and Apple Computer. Find the symbol for the stock (for example, J.P. Morgan Chase is JPM) and the exchange on which it is traded (JPM is traded on the NYSE).
Step 2 - Find the historical ups and down of your chosen stock going back no more than ten years. You can find this information at a number of well known sites on the web. Do a little research to find these site.
Step 3 - Find a period of several months or even a year when there have been major price fluctuations in the stock. Research what happened during that time period that might have contributed to the fluctuation. A place to begin is with the Wall Street Journal or on the business pages of a national newspaper, such as the New York Times or the Washington Post. Perhaps a "this day in history" web page woud provide some information.
Step 4 - Write a short analysis that links changes in stock price to internal and external factors. As you analyze the data, be aware that it is sometimes difficult to know why a stock price fluctuates. Give me you best analysis.
Follow-Up Questions (please respond to these as well):

Do you see any similarities in the movement of the various stocks during the same period? For example, did the stocks move up or down at about the same time? If so, do you think the stocks were affected by the same factors? Explain your thinking.
Based on your analysis, did internal or external factors have the greater impact on stock price? Which factors had the more long-lasting effect? Which factors had the shorter effect?
Why do you think it is so hard to predict changes in stock price on a day-to-day basis?