Wednesday, January 27, 2010

The Daily Note - News Moves

News moves stocks. OK, you know that, that is why you watch earnings reports. It's news. But did you know that there is a great amount of other news that moves stocks as well sometimes quickly other times more slowly.

We all know that analysis in form of upgrades/downgrades, earnings estimates and new products move stocks the most to a greater or lesser degree. Rumors spike them or tank them occasionally, which is why it is important to keep abreast of the real news at all times. Yes but how you might ask? And I will answer that with the current information available out in the marketplace it is a pretty tenuous task.

There are thousands of news services around the world and it is not disputed that most news that make it to the 'main stream' has to be distributed over the main wires. Services that stream these wires largely display headlines. I am sure you are familiar with Dow Jones, Reuters, Business Wire, for business news streams; most of which are scanned without much attention to detail. Of course you also realise that business news is largely released as PR News as well as First Call for analysis news.

These streams are often added to the other main news streams that are sent out by API, the former UPI, Fox, CBS, NBC, ABC and others I've forgotten. It was a hard enough task when I was doing it for a trading room; today it's even more difficult as the news has become more opinion and coupled with distributions not seen before on social media, the opinions often become rumors.

False facts are often enough taken as truths, so we as traders have to be even more aware than ever before not to fall for the news that may be discarded for lack of evidence later.

What I have practiced in the past and still find helpful is to look at the posts and the source. I suppose I have the advantage of doing just that for 3 years so my knowledge of sites is more in depth, but without your diligence in finding out what is truth and what is not, you will never learn to differentiate between them all. So this is what I suggest:

Read the headline, but then read the first sentence, scan to the midsection where most of the real facts are hidden. It is where often you'll find disparity between the headline and the real story and will often be glad you did not jump into a stock based on what was whispered, posted, or told. On the other hand with practice you will be glad that you can jump into stock with recognition that the post carries truth. Remember the more people acting on news, the better the stock moves into the the direction written.

Do not discount the regular news as unimportant. Major events move stocks and if you are aware of them early, you can have an advantage. In example, many companies and commodities can be effected by weather, if you wait for the analysis, you are too late. Being able to decipher news quickly is another trader tool which has its advantages and needs practice.

Happy Trading, Living and Dancing

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NFLX Earnings Play

Posted 06:41 Eastern