Twitter Inc (TWTR) might not be so hot as a stock, but the platform has attracted market participants, as research firms such as Citron have been tweeting ahead of their news releases. That’s at a corporate level, but as President Trump and other leaders have proven, tweets can move markets.
So while it might seem frivolous to pay much attention to notes that are no more than 280 characters in length — and that only due to recent expansion of the format — you can miss out on market moves or visible market forces if you ignore the Twitter-sphere.
Here are some examples of some famous tweets.
Who could forget Hillary Clinton’s tweets about the healthcare industry, when she was running for U.S. President? This one, in particular, moved markets.
At the time, Clinton was the leader in the presidential race, and market participants were already pricing this in. Once she tweeted about price gouging, the biotechnology and pharmaceuticals industries sold off. Here’s a look at what happened to the iShares NASDAQ Biotechnology Index Fund (IBB) after the tweet.
That tweet sent the exchange-traded fund (ETF) down for multiple sessions.
Moving on, one of the most recent famous shorts was Valeant Pharmaceuticals (VRX), and a tweet from Citron Research sent the stock significantly lower:
The research firm gave a heads-up before issuing its research report, outlining accounting discrepancies and indicating that Valeant could have been “the pharmaceutical Enron” at the time.
Here’s what happened after the tweet and publication of the research report:
The bottom line
While it’s easy to dismiss Twitter as the rantings and ravings of random people, it’s important to consider what messages might be more than that. There’s plenty of proof that users like Citron Research, Muddy Waters, and your favorite (or least-favorite) politician can move the market and/or create trading opportunities. Following your favorites is easy on Twitter; even if you never profit from what you read, you won’t be bored by what everyone is saying.
Jeff Bishop is lead trader at TopStockPicks.com. He runs short-term trading strategies, using stocks, options and leveraged ETFs.