Outside the Box: Key Stock Market Moving Catalysts

Several types of events can impact the marketplace and stir up consensus opinion, which can set up the potential for major surprises if the crowd is indeed wrong. In this installment of “Outside the Box” we will review some important catalysts that need to be monitored when anticipating large market moves.

The first and probably the most widely followed event or catalyst is the earnings report. Just before an earnings report is released there is usually a bias toward continuing the momentum from past quarters’ earnings. The larger the past positive surprises, the higher the likelihood that the upcoming earnings event will repeat that trend.

In a situation where the crowd anticipates a big earnings number and the company announces earnings well above expectations, a sell-off can be the result because the buying volume had already been exhausted prior to the release. On the other hand, heavily shorted stocks can surge even with an earnings figure that only met or came in below expectations. The bottom line is that expectations as well as announcements of earnings guidance are important to monitor.

Another important event is the company board meeting. Many companies often announce stock splits at board meetings, and the members meet with analysts around the time of these board meetings. This typically generates a lot of bullish bias, especially for stocks reaching new highs. This really applies to stocks that have had a big rally and have an increased probability of announcing a stock split or some other corporate action at the board meeting.  

Industry conventions or conferences also stir up a lot of trading action. This is especially true for hi-tech stocks. Many institutional investors and Wall Street analysts attend these meetings, and their reactions to these presentations can generate huge fluctuations in buying and selling pressure on individual stocks. For the individual trader, this can be a tremendous opportunity to garner profits.

These are not the only events that impact the market. Others, such as stock buybacks, can act as a big catalyst. Stock share buybacks typically have a positive short-term result on a stock’s price, as buyers are attracted by the reduced supply of outstanding shares. Analyst ratings are also key, as well as the trend of the ratings. Broad market events are also important; Federal Reserve meetings and key economic reports are certainly instances of broad market events that can influence stock prices and create trading opportunities.

Happy Trading.

Jeff Neal 
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
Visit Jeff’s Forum
Listen to Jeff at www.ProfitStrategiesRadio.com