Why Are Company News Important?
Hello traders. Welcome to the stock trading course and the fourth module short to medium stock trading. In this lesson we’re going to talk about company news, and why it’s important for you to be on top of it. Company news are extremely important for day traders not because they will have an impact on their open trades, but because important news will bring volume to the market.
Ok, remember that we are trading in a market where the information is available to everybody at the same time. So, important news are not going to be used for your open trades but they are going to be used to know which stocks are in play. As day traders we really are not concerned about a negative or positive move in a stock. We really just take advantage of it and try to ride it in any direction and that is correct. As day traders we don’t actually mind if the stock is moving up or down because we are not holding a position for an investment purpose. We are trading. We are just entering the market at one point, exiting the market at the next point, and taking a profit. We don’t have any opinions on the companies fundamentals or if a company’s stock is under valued or over valued. We focus on volume. We want to be trading the stocks that are in play, the stocks that everybody else is trading, the stocks that are moving, because if you are looking at a stock–
Lets take an example of XYZ stock which is a stock that doesn’t exist. It’s just an example. So you’re looking at XYZ and you decide to buy XYZ at 21.50, and you buy 100 shares of XYZ at that price level. If there is no volume in the market the price will not move and you will get stuck with the buy order that will not yield any profit. That’s why we are going to be looking at the important news before the market opens to find a stock that are in play and that will bring us profits. This is why it’s important to know what’s going on before the market opens.
Important news will be on the wires over night or before the opening bell. This will have two effects. One, it will bring players to trade the stock premarket, and two, it will bring an exaggerated above average volume to the stock. Let’s imagine a stock that trades an average of one million shares per day and has a very important news about an acquisition. Maybe this stock is going to be trading three to four million shares that day and it will be moving at an above average yield too. So you are going to–you want to be on top of the news to know which stocks are going to be moving and which stocks are not going to be in play. And because we are day traders and volume hunters we will always look for the stocks that are in play.
Now I’m going to go and show you a couple of web pages where you can find the news and I’m going to give you an example of a news that was released today and impacted the market aggressively.
The first thing we are going to do is I’m going to show you how to make a little filter to filter only the news headlines of the companies that you follow. Let’s say that on a daily basis you trade Apple, Netflix, Amazon, Linkedin. Let’s add a couple more, take us through it-and let’s create one filter for these companies. If you go here–and this is done on the NASDAQ webpage-and you can go here by going to nasdaq.com/ quotes/companynews. Now let’s read this one. Let’s say Apple, then Netflix, then Amazon, then LinkedIn, then let’s have Twitter and Facebook, alright? And we want only company news from these stocks. So this is what we created and we just click on go. And right here–I typed the Apple ticker incorrectly as you can see but it doesn’t matter because it’s just an example and right here you’re going to have all the news in real time about the stuff that you follow on a daily basis.
Now this is the first thing you’re going to do. You’re going to create a list of stocks that you follow on a daily basis and you trade on a daily basis, and you are going to look for the news that is going to impact this stock. For example here on Netflix we have a Dish [inaudible 00:05:29] Time Warner cable merger. This has nothing to do with Netflix per se, but it is a competition news and because of this you can go to the Time Warner ticker and see what’s going on. Alright. The first thing we are going to do is we’re going to create a list. Then of course, you are going to these websites to look for news on other stocks because remember, not always the stocks that you trade on a daily basis are going to be the stocks that are moving. Sometimes you’re going to have news about a stock that you have never heard of and that is going to be in play for one or two at the most and you want to get in.
So, you are going to go the NASDAQ.com/news website and you’re going to look at the news on the stock market. Then another website or another good website for news is called Bazinga.
Bazinga,com–we are right here on the website and as you can see, you just hover your mouse on news and you can have news on earnings, guidings, dividends, buy box legals, interviews, management, etc, And if you click on news you are going to get a list of all of the news that are important right now. The breaking news that are going to impact the stocks and the market. For example XBO logistics extends tender offer to acquire Conway for 47.60 a share. This just got in so XBO might be a stock to be looking at tomorrow because of this tender offer.
You can of course go and see what’s trending and you can have news on small caps earnings not only the tops news on the markets but you can go on a very specific topics to find news that you are going to use to see what’s in play. Now Bazinga is a great site and we are going to look at a few other right now.
Another website of course is the Wallstreet Journal that you go to wsj.com/news/markets and you can look at all the breaking news that are happening right now. You can also go to reuters which is an international news agency and one of my favorites to get information from, and of course you can go to reuters/finance/markets and right here you can get news on U.S. markets, markets that are European markets, Asian markets, stocks etc.
If you click on stocks you can see which are the New York stock exchange biggest gainers, biggest losers. NASDAQ [inaudible 00:08:40] has the biggest gainers and losers too and this will help you because–for example right now the market is closed, but yesterday’s biggest gainer on the New York stock exchange was WWPN or not, which had a percent change of 40% which means that it traded from [inaudible 00:09:07] the high fives to it’s close to around at 10.22. And because this was the biggest gainer it might still be in play tomorrow so you might want to take a look at the open tomorrow at this stock. And you can do the same for the NASDAQ and the AMEX.
Now another great source of news is Twitter, and not Twitter in general, but you have to know which account to follow and you want to follow the journalist that cover the economic financial markets. So you have to follow Bloomberg, CNBC, their zero hedge and if you like or if you want the list of the accounts to follow in Twitter, just finish this course and this will be available to you. Now I’m going to give you an example of an important news that hit the market today. We’re going to go to the Bloomberg twitter or the Bloomberg business Twitter account and as you can see we had a breaking news.
AB ImBev and SABMiller reach agreement on acquisition in which AB ImBev is going to buy SABMiller for 44 pounds a share or 67.48 dollars a share and that’s about a 109 billion dollars–106 billion dollars. AB is going to buy SABMiller. This is important news and if you go to the chart–we’re going to go to the reuters chart of SABMiller.
You can see the spike in prices on the–you can see the average price on the last 5 days and when the news hit the market or the wires you can see that the stock rallied immediately for about 9% to its closing price and that’s how news are going to impact the stocks. If you don’t follow the news there’s no way you could have known that AB was going to buy SABMiller for 106 billion dollars, and there’s no way you could have played this rally. There’s news about stocks every single day and this is why day trading stocks can be extremely profitable.