Day traders deal with so many tickers every day and it can be difficult to keep track of each and every one of them. All day traders have a different strategy for finding stocks to play. From stock scanners to trade alerts, there are plenty of ways to find good stocks to play each day. Regardless of how you find your stocks, you will always want to know why a stock is moving. Knowing why a stock is moving can help give you determine the magnitude of the move. I find most of my plays using a stock scanner so I have very little information when a stock is moving, other than the fact that it is moving. I don’t think I need to convince you that it’s important to know why a stock is moving, so let’s get straight to the point.
How to Find Out Why a Stock is Moving.
This list is in order of which to do first. Usually you can find out why a stock is moving from the first few items, but if you can’t, the others can be helpful.
- Look at the stock chart for multiple time frames – First things first, I will look at a stock chart for the ticker I am interested in. I will look at the intraday trend, the short term trend, and the long term trend using a few different charts. This can help give you an idea as to how the stock trades from a historical perspective. It can also let you know if the stock is moving on a technical breakout. I use my trading software for charts, however, you can always use StockCharts.com.
- Check for news – Most of the time, when a stock is making a big move, it is due to a news story or press release. I will check Yahoo Finance, as well as some other sources, to see if there is news moving the stock. This also includes analyst upgrades/downgrades. I will analyze the news to see how good/bad it is and try to determine how much it can move the stock.
- Check for a Seeking Alpha article – Sometimes, when there is no news on a stock, there may be a Seeking Alpha article. These articles have been able to move stocks a lot as of recently. Sometimes, the article will be shown on Yahoo News, however, sometimes it won’t so I check the actual Seeking Alpha website.
- Check the message boards – While message boards are usually filled with useless banter and wild predictions, they can be helpful to check when a stock is moving, especially if it is a penny stock. You have the advantage of a large group of people all working together to provide information. You can usually discover what is moving the stock because it will be mentioned on the board. I use Investors Hub as my go to message board. Don’t get caught up in listening to people’s opinions. Focus on the facts and learn why the stock is moving.
- Check Twitter – This is similar to checking a message board. Just do a search for your stock name in the Twitter search bar with a dollar sign in front of it (ex: $AAPL). Sort results by “All” instead of “Top”, and you can see all of the most recent tweets about your stock. Sometimes you can get some valuable insight. Once again, focus on facts not opinions.
- Check for a stock promotion – Stocks can move a lot when being pumped by people with large email lists. There are a few websites that keep track of these promotions. I like to use the Stock Promoters website to check quickly. I also subscribe to a lot of penny stock newsletters so I can find out earlier.
- Check for a short squeeze – A stock can run exponentially when shorts get squeezed out of their positions. I like to know how many shares are short and how many days it would take to cover. You can use the Short Squeeze site for some bigger stocks or OTC Short Report for penny stocks. I don’t think this data is always 100% accurate but it is still good to know.
- Check SEC Filings and OTC Market Filings – Sometimes a stock will move based on a recent SEC filing. Check the EDGAR website or the OTC Markets (for penny stocks) to see if a company just released an important filing.
- Check indices and sectors – Some stocks move with the market so it is important to know what the market is doing. I pay attention to larger indices like the S&P 500 (SPY), Dow Jones Industrial Average, and Russell 2000. I will also check certain sectors to see if they are “hot” an a given day. I use my stock software to get this information, but you can always check a site like Bloomberg to get your information. This kind of analysis is best for bigger board stocks like NASDAQs.
Finding out why a stock is moving is just the first step. You will want to create a solid plan for trading the stock next, but that’s a completely different topic. The process outlined above is simple:
- Find out why a stock is moving
- Determine the magnitude of the move
- Create a plan to trade the stock
You can also use the resources mentioned above to find stocks for the next trading day. Knowing why a stock is moving provides clarity in the market and can help you become a better trader. The more you know about the move, the better.