Experienced investors know that timing a sell is a lot harder than a buy. Fortunately, there is a simple tool that has served us well. The data for the tool is readily available from MarketWatch and does not cost anything. The tool is the analysis of comments on popular stocks and commodities.
This column describes how the comments data from MarketWatch can be used in conjunction with other traditional pieces of sentiment data. The chart shows how the sentiment on Apple has changed and can now be interpreted as bullish.
Please click here to see the chart of Apple sentiment.
At extremes, sentiment is a contrary indicator.
How Apple top was called with MarketWatch comments
Just about 12 hours before the Apple AAPL peak at $705, I published a column on MarketWatch titled “ Smart money selling Apple’ .” The essence of the column is summed up in the following quote:
“As the stock crossed $700, the Smart Money was selling Apple. In our parlance, the Smart Money represents actions of ultra-sophisticated investors who know more, who know early, and who have more analysis power. According to our algorithms, on Wednesday, the Smart Money was a net seller of $767.12 million of Apple stock. Interestingly, according to our algorithms, money flow in Apple stock yesterday was negative $476.36 million.”
The column received 57 comments. Six were positive, nine were neutral and 42 were negative.
Although the sample size is small, so far, the data shows that when positive comments on a technically overbought stock or commodity fall below 15% of all comments when a contrary viewpoint is presented in the column, it is a top.
In addition to several stocks, similar data was seen when we recommended selling silver (SLV) at about $50; silver was accumulated at $17.73. The follow-up call to short silver with a target of $34 met with even more negative comments. Similar results were seen from comments on the call to sell one half of long held gold (GLD) position at $1904.
An investor does not need to limit himself or herself to my columns. Counting comments on almost any contrary column and dividing them into positive, negative and neutral categories works. The only requirement is that the author himself or herself is an accomplished investor with a long track record...Read more at MarketWatch
