Tying News into a trade
What my next short term trade is going to be based on is a combination of upcoming news, company stats, and current trends. I am going to attempt to use an upcoming news release to my advantage. Getting right to the good stuff, the research, what I am looking for this time around are stocks that have just gapped down and are trading well below their 200-day moving averages. As well, these stocks are trading near or at there 52 week lows and also have some type of news coming out next week.
How I found companies with news was through my good friend yahoo finance, http://finance.yahoo.com. After I did my search to find the companies that were trading basically in the dumps I went on a technical search to find certain patterns I was familiar with. What I was looking for were stocks there were either very close to their 50-day moving averages or far below their 50-day moving averages. Naturally, stocks have a tendency to retract or climb towards their 50-days, eventually. If I saw a stock that looked interesting, I would type its ticker into yahoo finance and go hunting. I would look at the following information:
1. Headlines - Was there anything coming next week? Did any news just come out this week?
2. Insider Transactions - Were there alot of higher ranking officers buying this stock or selling this stock recently?
3. Insider Roster - Based on what I found from who was doing what, I would give myself an opinion on how big I thought it was. For instance, if the Director was excercising options worth 200 shares valued at maybe a few grand well then I could care less.
4. Message Board - Yahoo finance offers message boards where people can post whatever information they want. These boards RARELY have anything useful. Read through some of these and you will find that there are some VERY incompetent people on here. I do not advise taking any information from these. What I used them for is to see if I could find the one or two people who actually new something and could relay some dates of upcoming events. This basically just gives me a feel for what speculative news (good or bad) may be coming up. Again, I highly highly recommend staying away from these boards, or if you want to read them TRUST NO ONE at all. REGARDLESS of who they may be, majority of the time they are bashers or someone trying to sell or pump the stock, PERIOD.
5. Key Statistics - What is the short % on the stock? Has this number increased or decreased relative to last month? These numbers just give me a little insight as to what may be a bullish or bearish trend. I am sure you have seen me speak of these indicators before but I will relay again that if 25% of the float is being shorted, it may mean someone knows more than we do. It is something to just take into consideration.
What is the debt on the company? How much cash do they have? If a company has a ton of cash and no debt it gives me a quick signal that the company will at least not be in any trouble for a little while. If a company has alot to offer but a crap load of debt and no cash, it most likely means you may be in for a interesting ride because you do not know if the company is secure short term or not.
What is the Current Ratio and Enterprise Value? The Current Ratio basically relays the debt and cash in one number. This number tells me how capable the company basically is in taking care of short term obligations. Higher the number the better. Enterprise value in a very basic sense can give me an idea if the company is possibly undervalued. What I am looking for is an Enterprise value that is less than the market Cap of the stock. This number is compromised by adding debt to the market cap and subtracting cash and cash equivalents. So in theory, if someone were to buy the company at its current price, this is (inna sense) is what they would be paying for it.
Now that I have explained what I was looking for in regards to finding a short term speculative stock, can you see how these factors tie in? You have inna sense a company that for the most part isn't getting bet against (shorting), a company that has some sort of news coming out soon (Headlines), a company that is stable for the most part (Current ratio, cash, debt,), a company that is possibly undervalued (Enterprise value, stock trading below the 200-day), a company that may have a short term play ahead (price relative to the 50-day MA), and a company that possibly has some insider knowledge (possible insider buying or selling). So, after about an hour of looking around at possible picks I came accross two main prospects: AXYX and GTI. ALL of the numbers I am going to use are from Yahoo finance, just a reminder, and are based off Thursday's closing price). I will go over my analysis of each company and what the company may do for me next week (quick overview):
AXYX - Axonyx Inc - CFO presenting at conference next Wednesday, (-) Enterprise Value (if a company has a negative enterprise value it means that technically the company is free for the most part because after buying all of the stock, the cash you would get back for it would cover what you paid for it), price nearing 50-day, no real intra-day bearish trends (stock price has been inna basic consistant range for a while), short % = 5% as well numbers have not grown much since prior month, high current ratio (lots of cash, barely any debt = can pay short term obligations), and no major insider transactions since January (something to think about though, look at this and you'll notice that insiders were selling heavily about a month before the massive collapse, hmmm... a clue maybe? Did someone know something we didn't? Something to think about.).
GTI - Graftech International ltd - Earnings get posted next Thursday, Huge Enterprise Value ($1.03 Billion vs Mkt. Cap of 381.50 Million, do you think these guys have more cash or debt?), Price trending too far away from 50-day which means possible natural retraction, consistant bearish trend with multiple dsitribution days, Short % = 7.19% but has dropped substantially since last month (6.80 M vs. 8.94 M), low current ratio (but every industry has different avergaes), and lots of share acquisitions (non open market) by all main officers, etc. (but this has been happening for literally years, and since they are not open market purchases, this probably means nothing to us at all; basically they are being given shares by the company).
So, now that I have gone over the two prospects, which do you think is a better choice? I am not going to post my pick between the two until I buy one or the other. I will most likely buy my shares either tomorrow or early next week. What we are going for here is (with AXYX) to see a natural little run from the CFO speaking, or (with GTI) to see some sort of price rise regardless of the earnings (since they will most likely be bad; companies do this often, it is actually really weird but you will see price rises before earnings are posted even when they are expected to be bad). We also tie in with GTI that with its price being far away from its 50-day that it may retract naturally.
Well, that is all for tonight, I apoligize if it is overwhleming but just take in the core concepts behind what I am looking at. Try to tie in all the little pieces of the puzzle together. You can post your pick or any pick for that matter in the comments section of this post if you want. I am not sure what I am going to do yet; hopefully I make my decision pretty soon here. If you have any questions on this I will be available all weekend so email me or post up. Have a great night,
To the future,
How I found companies with news was through my good friend yahoo finance, http://finance.yahoo.com. After I did my search to find the companies that were trading basically in the dumps I went on a technical search to find certain patterns I was familiar with. What I was looking for were stocks there were either very close to their 50-day moving averages or far below their 50-day moving averages. Naturally, stocks have a tendency to retract or climb towards their 50-days, eventually. If I saw a stock that looked interesting, I would type its ticker into yahoo finance and go hunting. I would look at the following information:
1. Headlines - Was there anything coming next week? Did any news just come out this week?
2. Insider Transactions - Were there alot of higher ranking officers buying this stock or selling this stock recently?
3. Insider Roster - Based on what I found from who was doing what, I would give myself an opinion on how big I thought it was. For instance, if the Director was excercising options worth 200 shares valued at maybe a few grand well then I could care less.
4. Message Board - Yahoo finance offers message boards where people can post whatever information they want. These boards RARELY have anything useful. Read through some of these and you will find that there are some VERY incompetent people on here. I do not advise taking any information from these. What I used them for is to see if I could find the one or two people who actually new something and could relay some dates of upcoming events. This basically just gives me a feel for what speculative news (good or bad) may be coming up. Again, I highly highly recommend staying away from these boards, or if you want to read them TRUST NO ONE at all. REGARDLESS of who they may be, majority of the time they are bashers or someone trying to sell or pump the stock, PERIOD.
5. Key Statistics - What is the short % on the stock? Has this number increased or decreased relative to last month? These numbers just give me a little insight as to what may be a bullish or bearish trend. I am sure you have seen me speak of these indicators before but I will relay again that if 25% of the float is being shorted, it may mean someone knows more than we do. It is something to just take into consideration.
What is the debt on the company? How much cash do they have? If a company has a ton of cash and no debt it gives me a quick signal that the company will at least not be in any trouble for a little while. If a company has alot to offer but a crap load of debt and no cash, it most likely means you may be in for a interesting ride because you do not know if the company is secure short term or not.
What is the Current Ratio and Enterprise Value? The Current Ratio basically relays the debt and cash in one number. This number tells me how capable the company basically is in taking care of short term obligations. Higher the number the better. Enterprise value in a very basic sense can give me an idea if the company is possibly undervalued. What I am looking for is an Enterprise value that is less than the market Cap of the stock. This number is compromised by adding debt to the market cap and subtracting cash and cash equivalents. So in theory, if someone were to buy the company at its current price, this is (inna sense) is what they would be paying for it.
Now that I have explained what I was looking for in regards to finding a short term speculative stock, can you see how these factors tie in? You have inna sense a company that for the most part isn't getting bet against (shorting), a company that has some sort of news coming out soon (Headlines), a company that is stable for the most part (Current ratio, cash, debt,), a company that is possibly undervalued (Enterprise value, stock trading below the 200-day), a company that may have a short term play ahead (price relative to the 50-day MA), and a company that possibly has some insider knowledge (possible insider buying or selling). So, after about an hour of looking around at possible picks I came accross two main prospects: AXYX and GTI. ALL of the numbers I am going to use are from Yahoo finance, just a reminder, and are based off Thursday's closing price). I will go over my analysis of each company and what the company may do for me next week (quick overview):
AXYX - Axonyx Inc - CFO presenting at conference next Wednesday, (-) Enterprise Value (if a company has a negative enterprise value it means that technically the company is free for the most part because after buying all of the stock, the cash you would get back for it would cover what you paid for it), price nearing 50-day, no real intra-day bearish trends (stock price has been inna basic consistant range for a while), short % = 5% as well numbers have not grown much since prior month, high current ratio (lots of cash, barely any debt = can pay short term obligations), and no major insider transactions since January (something to think about though, look at this and you'll notice that insiders were selling heavily about a month before the massive collapse, hmmm... a clue maybe? Did someone know something we didn't? Something to think about.).
GTI - Graftech International ltd - Earnings get posted next Thursday, Huge Enterprise Value ($1.03 Billion vs Mkt. Cap of 381.50 Million, do you think these guys have more cash or debt?), Price trending too far away from 50-day which means possible natural retraction, consistant bearish trend with multiple dsitribution days, Short % = 7.19% but has dropped substantially since last month (6.80 M vs. 8.94 M), low current ratio (but every industry has different avergaes), and lots of share acquisitions (non open market) by all main officers, etc. (but this has been happening for literally years, and since they are not open market purchases, this probably means nothing to us at all; basically they are being given shares by the company).
So, now that I have gone over the two prospects, which do you think is a better choice? I am not going to post my pick between the two until I buy one or the other. I will most likely buy my shares either tomorrow or early next week. What we are going for here is (with AXYX) to see a natural little run from the CFO speaking, or (with GTI) to see some sort of price rise regardless of the earnings (since they will most likely be bad; companies do this often, it is actually really weird but you will see price rises before earnings are posted even when they are expected to be bad). We also tie in with GTI that with its price being far away from its 50-day that it may retract naturally.
Well, that is all for tonight, I apoligize if it is overwhleming but just take in the core concepts behind what I am looking at. Try to tie in all the little pieces of the puzzle together. You can post your pick or any pick for that matter in the comments section of this post if you want. I am not sure what I am going to do yet; hopefully I make my decision pretty soon here. If you have any questions on this I will be available all weekend so email me or post up. Have a great night,
To the future,
posted by Blain Reinkensmeyer at
11:51 PM
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