USING MARKET “NEWS” THE RIGHT WAY

My oh my, how stock manipulation has seeped through the cracks of regulation to run rampant on so many online “news sources”. A few recent stories from popular websites have really stirred up the market lately. Not that I’m really complaining per se; I mean, it’s been a profitable time for me and most other volatility-type traders who can spot these dips and rips and know when to take the other side and use this as an advantage.

I’m reminded of a recent article posted on Feb 4, 2014 on the stock AMBA, which proves the point that any “Tech Analyst”, posting an article entitled “Ambarella Looks Like A Short” can move a stock considerably. Here’s the reaction to AMBA from that specific article:

As you can see, AMBA fell hard, only to bounce almost exactly off of its 25 level to resume its upward trend into the beginning of March. One can only wonder how many shares the author accumulated at this level(?)!

Another recent example was on the stock YELP. In an article entitled “If Yelp’s CEO Refuses To Own Any Shares, Why Should You?”, published on March 10, 2014, YELP dropped from the 97 range down to the mid to low 88’s.

I’m not going to go into the credentials of this particular author – I will leave it up to the reader to do their own investigations.

Sooooooo….how can one use this as an advantage in your trading? Well, personally, I don’t mind so much that market participants are listening to these authors and reacting in irrational ways. After all, to a large degree, trading is all about finding a weakness or instability and taking the other side of it in order to profit from it.

I’ve actually created an extensive list of authors which move markets and thinly traded stocks, as well as signed up for alerts on these sites when these particular authors post an article. When I get an alert, I quickly skim through the article, look at the stock for its support and resistance lines, and play the breakdowns, breakouts and the bounces. Since I know that this movement will most likely be short-lived, I usually play the near month options or sell the weeklies into these types of over-extensions.

I hope this sheds a light on how to use these so-called “news sources” to your advantage.