The Top Five Catalysts That Can Make or Break a Stock

Unless you’re the most boring person in the world and exclusively own just 30 year Treasuries, your portfolio’s value will probably gyrate substantially from day to day.

Although stocks behave randomly a lot of times and do strange things for no reason, there are several specific factors that could cause your stock to move up or down. Here are five of them:

5. Technicals

Technicals often get a bad rap. Efficient market backers and pure fundamentalists think the indicators are a bunch of mumbo jumbo. I mean how could a shooting star candlestick indicator possibly be negative for a stock?

Well, it’s because there are sometimes self-fulfilling prophecies in the market and if enough people believe in something, they will buy or sell at the same time, and it will happen. Whether that happens enough times to make technicals worth it is up to the individual reader. If a stock has held a 200 day SMA for a long time and it’s in danger of falling below, that’s a sign to pay attention and possibly brace for some volatility in the short run. The 200 SMA could hold, or it could fall below and take out a lot of stops, or it could fall below and bounce back. In all three events, it’s a sign to pay attention.

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4. Federal Reserve Interest Rate Decision 

Unless you own a stock that isn’t very correlated to the market, it’s no secret that the broader market plays a big part in a security’s movement. In terms of the broader market’s value, there is probably no more important factor than the Federal Reserve’s decision whether to adjust the interest rate. That makes FOMC meeting days sort of important. If the Fed does or says something unexpected, brace for volatility.

3. Dividend Announcements

If your stock is a high yield stock and a large percentage of the stock’s investor base owns the security specifically for the quarterly payout, dividend announcements could be major catalysts. If management raises the dividend unexpectedly and the stock is undervalued versus similar peers, the stock could go up. If management unexpectedly cuts the dividend payout, there could be a substantial selling in the short run. Given the importance of dividends, make sure to do research on a stock’s expected cash flow, its earnings, and its balance sheet.

2. New Product/Service Launch

Companies live or die depending on the success of their existing product/service lines. Apple Inc. (NASDAQ: AAPL) for example, thrived after the launch of the iPhone. If a new product does well and beats expectations, investors could bid the stock up. If a product falls flat and misses, the opposite could happen.

1. Earnings Reports

Most importantly, earnings reports can really move a stock. Not only does a company report all its vitals such as cash flow, earnings, etc. for the previous quarter, but also many companies provide guidance on future earnings and management adds color with their conference calls. A strong earnings report, better than expected guidance can be really good for a stock.

As a bonus, there is also stock related news – such as FDA decisions for biotechs, OPEC decisions for energy stocks, big contract wins for tech/DOD suppliers, etc.

Don’t forget to sign up for our free newsletter that will launch soon that uses market maker sentiment, potential catalysts, fundamentals, and technicals below. Volumebot is a website that shows market maker sentiment using the latest short volume data reported to FINRA. Short volume isn’t the same as short interest but can nevertheless be useful in terms of highlighting days investors should pay attention to their stocks when short percent for a stock changes substantially.

Don’t forget to read the Top Five Buys on the Market Today as well.

Disclosure:The author has no position in any security mentioned but reserves the right to buy or sell without notification.