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20

April, 2015

How to profit from the death of a trend

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Summary:

We’ve been asked several times how we use social data in our investing and trading decisions.  So, we put together a little five-part series that explains a few ways that we (and our institutional friends) are using LikeFolio data to discover trading opportunities.

Social Data Trading Lesson 1:  Comparing a stock vs its history.

Trends are important. Changes to trends are even more important. 

Case in point, Deckers.  The makers of Uggs boots were riding a trend of their product being popular for quite a while… until the trend stopped.  Our social data picked up this consumer shift and correctly predicted that $DECK would miss earnings.  

That turned out to be an awesome trade.

The data:  Mention volume on a brand by brand basis is available on the TD Ameritrade Social Signals tab, powered by LikeFolio.

The play:  Look for big changes in mention volume around a brand that makes up a majority of the company’s revenue.  It’s especially juicy when you find these consumer shifts before Wall St analysts or the company start discussing them.

Examples:  Budweiser, Tesla and LinkedIn are all getting a lot of chatter on social.  In addition, each of them is fairly reliant upon a single brand name for most of their revenue.  Should any of these companies see a dramatic dip in mention volume, we’ll take a close look to see what might be going wrong with the company.

Sometimes it’s nothing but a normal lull in chatter, but other times (like with Deckers last quarter), it’s a juicy trade just waiting to be made.

— Andy Swan is the founder of LikeFolio, which searches all of Twitter for important shifts in consumer behavior around the brands owned by publicly-traded companies.

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