Market Research Helps Play the Game

What kind of signs do you look for when investing in the stock market? It can be a game and let me show you how you can perfect it.

One of my favorite movies of all time is Moneyball. It’s the true-life story of the Oakland A’s general manager — Billy Beane — finding wild success by adopting an unconventional “data-driven” method for evaluating and picking baseball players.

Spoiler alert: simple math was utilized to develop key metrics to build an Oakland A’s team that made it to the playoff’s at 80% less player salary than the New York Yankees… who, by the way, won the same number of games as the A’s.

What made the movie so powerful for me was that Billy Beane challenged the conventional institution of baseball, which embraced completely different “traditional” methods and came out on top by simply trusting his data.

Sound familiar? Today, we’re afforded countless traditional metrics from storied financial institutions that would have us believe the only place to find the real valuation of a company’s stock is to sift through data buried in quarterly earnings reports. Or maybe you enjoy technical analysis of charts to gain your edge in the market?

It doesn’t matter what your current techniques are for finding success in the market but I’m here to tell you that it can be turbo-charged by introducing a third indicator… Social Media Collective Intelligence.

What Are People Talking About?

Now I’m not saying that you should just follow a couple of analysts on social media but I am saying that you should leverage a system that generates collective intelligence on the entire market by rolling up millions of financial social media messages per day.

When millions of messages are processed each day, my social media collective intelligence system is able to determine inefficiencies in the market that no one else is tracking because they’re so focused on mainstream traditional indicators. And if they are tracking them, they’re not handling the sheer volume that we monitor.

Little indicators such as changes in the average number of messages written on a stock can have a huge impact on forward price movement. As I’ve pointed out before, every day we track the “chatter volume” on more than 7,000 U.S. traded stocks to see if people are creating a ground swell of momentum for a stock before mainstream news outlets pick up the coverage.

That’s a lot of stocks to follow and an enormous amount of chatter to monitor — but it ensures you get the whole picture, not just a thumbnail.

We also track sizeable changes in message sentiment (buy/hold/sell) for a stock and perform backtesting to see if these shifts in the past have caused forward price movement. The bottom line is that we focus on social media metrics that have historically forecasted price movements and have built an automated system to alert us when these shifts occur.

Also, isn’t it nice to know when someone is traditionally right or wrong and if they are on a hot streak of picking winners?

Our system contains a message author “reputation engine”, ranking the top authors who consistently pick winners through their social media messages based on stock price movement after the messages are published.

Ever wonder what makes a stock’s price change dramatically when there’s no mainstream news or company earnings released? Oftentimes, the answer is found in social media… and the social media collective intelligence system is capturing and alerting us to it.

See The Entire Field

As a U.S. Marine, I was taught to fight my best with the weapons that were afforded to me, which means we had to do more with less. Using social media indicators gives you a way to fight back “asymmetrically” against the big guys who have millions invested in infrastructure to game your every move.

The best part is that we’ve determined that the largest price movements that occur from these social media indicators usually occur over a 60-day period, so you don’t have to be glued to your trading system screen in fear that you’ll miss an opportunity or get caught up in the daily chaos of the market.

Biotech and SCMI’s Teamwork

Biotech stocks offer rapid price movements surrounding the release of information on the performance of drug trials. Often times, we can pick up disparate pieces of information ahead of time in social media that allows us to jump the gun on the direction a stock might take in reaction to this information.

That’s what’s interesting about biotech and why I picked this sector as one of the first stocks for this system. The SCMI provides me with 10 to 15 opportunities per day across all sectors based upon the all the social media signals we have setup.

I noticed immediately that I was receiving a higher volume of signals specific to the biotech sector and that these signals were more timely and accurate than most of the others. I decided to take a “gold miners” approach and focus my attention on “mining” the richest ground so I could maximize my returns for all the analysis I was doing.

FireEye recently released a report stating that a group of hackers who appeared to have “investment banking” backgrounds had broken into the email systems of over 100 biotech and healthcare companies to get inside drug trial and regulatory information before it was released to the public.

This group, dubbed “Fin4”, focused on biotech because this kind of information “significantly affects company stock price” in this industry. My social media collective intelligence system is able to generate similar data by pulling and correlating millions of publicly available social media messages per day, which is the legal way to mine this data.

Stay tuned as I continue to monitor social media opportunities across the markets!

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Ben

P.S.
I’m very excited to be a member of the Dent Research team and thank you for the great welcome and feedback I‘ve received.

Categories: Markets

About Author

Ben Benoy is a veteran of the U.S. Marine Corps and has been an active retail trader since 2006. He identifies investment opportunities based on key social media trends. He first identified the concept in 2008 and has since developed a tool for tracking investment “chatter” between social media users. His proprietary Social Media Stock Sentiment system has developed into a state-of-the-art platform that identifies and classifies chatter about stocks through algorithms and other indicators to forecast stock-price direction. Ben’s track record speaks for itself — over the past 12 months, his system boasts a win rate of 82.2% on 112 stock trades.