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Your online news alert guide to
stocks and shares and more
Stocks
Shares
News
Alerts
When and Why News events are Important
...
Many investors are "news
investors". They watch for important news,
interpret it quickly, and make fast investment
decisions based on it.
These investors are "news
experts" ... people who
know how to interpret the news and the impact
it will have on investor buy/sell reactions.
What's their secret?
They invariably have a
conscious or sub-conscious mental model about
the "AFFECT' a News Release will have
on the stock market or a particular stock.
What's the formula for
interpreting news events?
The formula has to do with the
expected or perceived"EMOTIONAL REACTION"
that any news release will have on an investor
relative the underlying investment instrument.
Below, I have posted a matrix
explaining the different "Levels of News", its
interpretative Description, and most
importantly ... the Emotional impact it has on
individual investor reactions. The matrix is
presented below ...
How can you find out
about, and take advantage of breaking News
when you invest?
By asking yourself one
question: When "Bad News" is announced, ask
yourself: "Who Benefits" and "Who gets Hurt"?
The answer gives you the clue
to what stocks to Short, and what stocks to
invest in for an upside move.
How can you get email
News Alerts as they happen?
There is a new Google alert
News service in a beta stage at Google.com It
will allow you to monitor a developing news
story, or keep current on a competitor,
company or industry.
You can sign up for specific,
breaking news by entering the news search
term you want to be alerted about. You
can access this free service by going to this
link:
Google News Alert Service
_____________________________________________
This is a
report written by Kendal Kulp, in April of
'08. Kendal is my stepson and the youngest in
the family. He is a smart and inquisitive 14
year old that "needs to know" how everything
works. I was particularly happy to see that he
wrote a report on "The Secret to Using News
to Invest in the Stock Market" for one of
his classes. He really understood the effect
of News relative to stock movements. He has a
very important message to share, and I hope
that you benefit from his research.
_____________________________________
"The
Secret to Using News to Invest in the Stock
Market"
by Kendal Kulp.
News, really affects changes in stock
market prices. First it is important to
understand that investors react to their
personal internal levels of greed and fear.
This is very crucial in understanding when
certain news can make a stock go up or down.
During my research, I stumbled across
an old investor�s saying, �buy the rumor, sell
the news,� and it caught my attention. I
thought about it and realized that it does not
always apply. I then found an article written
by Marty Chenard of StockTiming.com about news
and its effects and impacts on investor�s
decisions depending on their �emotional
reaction.� �They invariably have a conscious
or sub-conscious mental model about the AFFECT
a News Release will have on the stock market
or a particular stock.�
I then came up with a strategy to use
in conjunction with the �news� and peoples
reaction to the news, to make commonsensical
investment decisions. I call it the� fear
factor.� This investment strategy plays off of
people�s fear using the fear/greed level in
the consumer/investor caused by news.
Knowing when investors start to panic is the
critical key to the fear factor because the
investor loses their ability to make logical
investment decisions.
A good example of
panic in the consumer/investor caused by the
news previously effecting stock prices is the
pet food recalls of 2007. The recalls started
with the Canadian company Menu Foods (symbol
MNUFF). On March 16, 2007 the price was $6.30.
When the company voluntarily announced a
recall on certain pet foods made with
ChemNutra Wheat Gluten, after reports of fatal
kidney failure among animals eating its
products, the next trading day at closing on
March 19, 2007 the price dropped to $3.63 that
is down 43.6% (Pink Sheets). Around 90 days
later, on June 19, 2007 the stock was down to
$2.63, a 72.45% drop (Chenard).
I looked at the different fear levels
people tend to follow in their decisions, and
found this to cause emotional panic in the
consumers and investors. This announcement
caused the consumer to start to panic because
their beloved, family pet could die.
Similarly; investors may fear that their
beloved money invested in a company such as
MNUFF may die.
Then I thought about what companies
would be positively affected by this news, and
decided that the animal health sector would be
affected the most. People would want to see if
their pet had been �exposed� to contaminated
wheat gluten, so they would take their pets to
the vet.
I researched looking
for veternarian chains and found a company
called Animal Health International (symbol
AHII). On March 7, 2007 the price was $11.50
per share. Around 90 days later on June 29,
2007, the price of the stock was $14.49. That
is a 26% increase. Surveys found that 62% of
the people that were aware of the news that
pet food could possibly be contaminated became
concerned, as more sound evidence was
announced, the consumer�s level of fear
increased to the point of panicking and
changed from buying the cheap, unsafe pet food
by retailers such as Wal-Mart, Safeway and
PetSmart to buying Premium, Natural, and
organic products (Animal Health).
To invest based on news one should
use a four step process. One; they
should look for news that is bad enough to get
people to panic. Two; ask yourself who
benefits and who gets hurt based on the
emotional panic in the consumer or investor?
Three; do research, based on your
research decide on which stocks would go up
and which would go down. Four; based on
your decision, buy the stocks that you think
would go up and short the stocks that would
down. This is the �secret� to using the news
to invest in the Stock Market using the fear
factor.
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