THIS Can Move a Stock Faster Than A Speeding Bullet
What has the power to move stock prices seemingly faster than a speeding bullet?
A stock catalyst is anything that can move a stock’s price. It can pertain directly to the stock, the company, the industry, or even the world at large.
Wait … there are tons of developments or bits of news that can potentially act as stock catalysts.
So how can you tell which ones might actually have the power to move a stock?
I’ll help you answer that exact question. In the next few issues, you’ll get an introduction to stock catalysts, including specific examples. I’ll also give you tips on how to identify a strong catalyst and patterns to watch for.
1. What Are Stock Catalysts?
A stock catalyst (also called a news catalyst or just a catalyst) is a development that has the potential to move the price of a stock. That’s broad, right? Let’s get specific.
Often, it’s news related to a company or an industry. However, sometimes catalysts can be less direct, like government regulations that can affect an entire industry or sector.
This isn’t something you can brush off as a trader. So, pay attention — it’s important. A catalyst can help you find the sweet spot for entering a trade. That can be before the stock price hits its highs (or lows, if short-selling).
Here are some examples of common stock catalysts:
2. World Events
Sometimes, something that’s reported in the news can act as a catalyst to move stock prices, up or down.
Think back to last year when Canada officially legalized marijuana. That was a huge catalyst that rocked the entire sector of marijuana-related stocks. Select traders made fortunes in record time by trading in this sector, thanks to the heightened interest and speculation around weed stocks.
Yeah, it was big news, but traders also saw it as a sign of changing times.
Suddenly, everyone wanted to get in on the ground floor with pot stocks. As a result, the prices soared through the roof. That’s a good example of a catalyst that made stock prices explode, but it’s important to note that a catalyst can act in the reverse way, too.
Bad news that’s connected to a sector or stock can have a negative effect on stock prices.
3. Company News
Sometimes, the news that rocks a stock price is specific to one company rather than the entire sector.
A good example here is a tech company like Apple. In this case, you’re looking for anything that may be significant, maybe a major product launch or an announcement of an updated iPhone with incredible new features.
These things can move stock prices in a big way.
4. Earnings Winners and Losers
If you want to be a self-sufficient trader, you have to do research on every single trade. That means you need to review earnings reports for any stock you’re watching. Public companies are obligated to release their earnings on a quarterly basis, usually not long after each quarter ends.
There are certain expectations or projections for a company’s earnings each quarter. If a company misses or beats those expectations, guess what? That can propel the stock price into motion.
A company’s performance report can kick off a stock’s uptrend or downtrend. If the company meets or exceeds expectations, that can generate optimism and excitement in traders, and that can boost the stock price. Buyers catch wind of the positive earnings news and rush to jump on the action.
However, if a stock underperforms and the company can’t specifically account for its lackluster performance, the stock price can decline. Earnings reports can be fairly reliable catalysts. Don’t overlook them.
5. New Deals
Did a company sign a big new contract or forge a partnership with an industry leader?
New business connections can generate trends in stock prices. For example, when music-streaming service Pandora announced partnerships with AT&T and Snapchat, it contributed to an increase in stock price, raising it almost 20%.
Make this part of your research routine. Scan regularly for updates on new partnerships, deals, and contracts — they can all influence stock prices. And the sooner you see the news, the sooner you can act.
6. Hires and Fires
Is a company experiencing changes in management? Time and time again, shifts in personnel and management prove to be catalysts for stock-price changes.
Just Google “CEO steps down, stock plummets” and you’ll see countless results where the stock price plummeted after a CEO resigned — especially under unfavorable circumstances.
Here’s just one example: The CEO of the tech company Micro Focus left after just six months on the job, and dragged stock prices down a staggering 40%. Now that’s a whopper. Note that depending on the circumstances, the price shift can be more or less.
Of course, it’s possible for this phenomenon to work in the opposite direction, too. Maybe a company hires a high-profile visionary employee.
If they make revolutionary strides and catch the attention of the press, it can create optimism that raises the stock price.
As a trader, stock catalysts can be hugely beneficial.
Let’s take a closer look at some of those benefits in tomorrow’s issue.
— Tim Sykes
Editor, Penny Stock Millionaires