Wednesday, April 15, 2009

Finding News That Moves a Stock Part II (rev 7/5/09)

In the last post we mentioned the four websites you should reference in finding stock trading news: Businesswire.com, Marketwire.com, Globenewswire.com and Prnewswire.com. The next thing that most traders want to know is what type of news is "buyable" news. Before giving you a list, it is important to be aware of some key points. First of all, trading the news is typically best suited for smaller cap stocks. These stocks have enough upside potential to realize large gains in a short time frame. Second, there are some scenarios where buying the news may not be in your best interest. There are always exceptions, but in my opinion, it not a good idea to buy the news under any of the following circumstances:

- A stock has already had a steady run-up

- Positive news is expected

- There is an extreme premarket run-up

- The company frequently releases news

- The stock is already at its high end in valuation

Again, if any of the things listed above coincided with a press release, all bets are off. If none of these issues exist, the following type of news is worth chasing:

  1. Extremely positive earnings surprise
  2. Significant debt reduction through a favorable means
  3. Favorable clinical trials results for biotech and pharmaceutical companies
  4. FDA drug approval
  5. Biotech/ Pharma company partnerships
  6. A company announces a deal with a notable, major company (ie. Apple, Walmart, General Electric, etc.)
  7. Substantial resource finding for a small energy or mining company

Remember, no method is fool proof, but it you look for news releases of small cap companies with the the guidelines I have outlined, you'll definitely up your odds of making some quick money in the stock market.

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