Hot Stock Tip Number 101

in Stocks

This “stock tip” requires a bit of homework. I know you want fast easy money. Patience. This is close to that.

Do a bit of research about companies in a vertical.

Identify companies in that vertical that share similar metrics. Look at summaries of corporate data: cash on hand, cash flows, debt, etc. In other words, dig into their financials.

Identify 5-8 companies that have similar profiles.

Track their stock movements. Track their news.

On periodic “general bad news” market swings keep an eye on those 5-8 companies.

Do 1 or 2 move outside the range of the others? Without any discernable factual basis? Without “news”?

Do the 5-8 companies tend to equalize their swings, as if in a dance?

Here’s “the tip” or at least food for thought: Some market movements are emotional. Some are “follow the leader” or trade on the green or red arrow. Some are just dips based upon a single shareholder making a move on a slow day.

What I am describing it an “all other things equal” scenario – where 1 or 2 stock prices get out of line, say by dropping 2.5% when all others drop 1.2% – MAY be an indicator of an opportunity to move in ahead of a rebalancing.

This is just food for thought and experimentation. It’s not irrational nor entirely speculative.

The risk is that there MAY be circumstances, not yet publicly available, explaining why a stock is “moving out of line”. There are laws prohibit trading on non-public information but one may assume that “it happens”. Of course, a big move by a single player ahead of the news could prove problematic, so look for indications of single versus multiple investor moves when deciding to experiment with this strategy.

Previous post:

Next post: