A Question: Where can one find TIMELY info regarding analyst comments and/or upgrades/down grades??? The following comment appeared in today's 'InPlay' at Briefing.com: "13:48 ET EMC Corp (EMC) 12.17 -0.58 (-4.6%): Comments out of Dain Rauscher Wessels this morning weighing on stock, and contributing to weakness in the storage sector as a whole. Firm expecting SeptQ results to come in shy of...[edited]." This could be helpful very information as I have a position in another storage stock (EMLX). But this analyst comment was not made know to me (via Briefing) until 13:48. Yet, it is stated that the comment was released in the morning. Others had knowledge of this analyst opinion several hours before Briefing relayed it. Where was it released? To whom was it released? Obviously this comment from Dain Rausher Wessels was intended to be viewed by someone, therefore someone other than Briefing.com is distributing this type of information. Is there some information provider, either free or fee based, which disseminates this type of information? Is there some source where independent traders can receive timely information regarding analysts' comments????
The best source of analytical information is probably First Call, but it is rather expensive for an individual. Unfortunately you will probably never be able to get that information at the same time as the "big guys" get it. This is a general synopsis of how it works: The analyst of a firm does his homework on XYZ compnay and decides he wants to put a buy rating on it. After going through the proper channels and it is accepted, they will start to build an inventory of the stock (sounds shady but this is generally how it works). Early the next morning during the morning meeting (every sell-side firm has one every morning), the sales traders are briefed on all the upgrades, downgrades, and EPS changes that the analysts have made. They each receive a written copy of all of the info. Around 8:00 AM (depends on the firm) the sales traders start making the calls to the institutional buy-side traders, who will take notes and report to their officers with any pertinant information. At the same time, the sell-side firm is faxing their morning calls to all the institutions on a list they keep (the faxes usually come late though, like after 9:00 AM - again depending on the firm). The order of which each institution gets the call is based on: 1) how much you pay in commissions to that firm 2) whether you are a holder of that particular stock 3) your relationship with that firm. This can be very important if it is a mid-day report. Otherwise, if it's early in the morning, this gives the buy-side firms a chance to have their morning meeting and decide how to/whether to react to the news. The advantage that the sell-side firm has is that whether you are a buyer or a seller, you will probably execute through that firm because they will have most of the order flow, thus becoming the ax for at least a few days. By the time it is reported to First Call or Bloomberg, half of the street already knows about it. Another disadvantage the individual trader has is that he can only read what is written and not get specific details which can sometimes be more important than the actually call itself. For instance, if a sell-side firm hires a new analyst, that analyst will specialize in a specific sector. He has already done the work on a number of stocks and perhaps at his last firm they were rated a buy. This new firm will now initiate these stocks with a buy rating, which might peak the interest of those who weren't aware of this. But to everyone who gets a call, the sales trader will tell you what the real deal is. Another example is when an analyst raises/lowers his earnings expectations. Many times the sales trader will tell you that it's just to be in line with all the other analyst expectations from competing firms. You're probably thinking why does an analyst care what other analysts think, but it happens on a regular basis. Sales traders do a pretty good job of letting you know what's a good call and what's a BS call. I'm not sure as to the ability of some of the other web based services to provide timely info though, so perhaps others on this board may be able to suggest some. DeeMan
DeeMan, Thanks so much for the detailed reply. Your posts (this one and others) have been very illuminating for us 'outsiders'. While your explanation of how anaylst info is disseminated makes me realize that there really is no way for me to get the timely info I desire, at least now I can just accept that fact and focus elsewhere. I am curious...in one of your posts on another thread you you mentioned that you were formerly a trader for a small cap money manager. Subsequently, you gave some informative replies to posters who queried you regarding your experiences. But I have question for you which is a little different: Knowing what you know from having been on the inside, I am curious what approach you will take as an independent trader? Will you trade news or ignore it? Will you you swing or day trade? NYSE or NASD? Stocks or something else? Will you trade using Technical Analysis...support/resistance?...what about other TA indicators? With your unique set of skills and experience, where will you find your edge as an independent trader? PS: I am grateful for the reply to my original post, please don't feel obliged to respond to this follow-up
Roger: For the past few months I have been working on 3 different systems each with unique attributes. All are based on some form of technical analysis (stochastics, support and resistance, candlesticks, and bollinger bands). One is more like scalping where I have a large percentage of winners, but the profits are not large. It is similar to channel trading. The second method is a daytrade, but the holding period usually lasts for a few hours, as it is a trade with the overall trend. The third is a swing trade which usually lasts for a few days, or I sometimes use options instead. I chose one stock (CSCO) that was liquid, but I really have no preference as to what I trade. The key for me was sticking to the stock I chose. If something doesn't work a few times in a row, it is self defeating to go find another stock in which it would have worked for that particular period. All of my goals are long term, and the only thing I care about are long term expectancies. I do a lot of backtesting, which can be very time consuming. I have spent countless nights staying up until 2:00 AM working on this. Perhaps if I were more computer literate I could figure out a quicker way of doing this, but I honestly don't mind as I believe the results will be worth it. During the day I spend most of my time watching and taking notes. I write down everything, including patterns I recognize, personal feelings I have as to which way CSCO is going to move, which way the market is going to move, what happens during significant points in the day (market just turned positive, CSCO breaks a resistancec level, etc), and anything else I can think of. Some of the best insight I get now is reading comments I made a few months ago and looking at that scenario from a different perspective. I use all of this information to tweak each system and make them as efficient as I possibly can. The key here is the understanding that I can never achieve maximum efficiency, as it will always be a never-ending learning process. I spend the least amount of time actually trading. I make on average about 3 round trips a day, but it really depends on the day. Once I'm in a trade I become very "detached", and I don't stare at level 2, the futures, or even the NASDAQ composite (Actually, I have removed all of these from my screen - except for level 2). When I enter a trade it is for a reason: It is based on the system I have developed. Therefor I only exit the trade based on the guidelines I have created by this system. In the beginning, it seemed everytime I was long and the futures ticked down, I fell into panic mode and would sell. The results were disasterous. Now I exercise discipline and the results are positive. Yes, there are times when I just know the market is going to head south, and I could save myself some money by getting out earlier, but for every one of those times, there seem to be two examples of when I'm totally wrong, and I miss out on a nice profit. I do know some people who are very good at trading on the fly - they just use level 2 and watch the futures and rely on their gut instincts, but that is not for me. Their weakness seems to be when the unexpected occurs and they're not sure what to do, and that is when you can lose the most. So in my opinion, I don't think it matters what method you use to trade. I chose different indicators that I personally liked or found interesting. Sometimes when I tested them out, they didn't work. Some other forms did work, and the important question was 'why'. Did I only adjust them in order to see what I wanted to see? Or was there something substantial to it. Almost all of what I use to trade now I learned on my own, not from my previous jobs. What I did learn though from my experiences is more what not to do. I never tell the market what it should be doing, I never use any form of fundamental analysis to justify a postion in a trade, I never listen to anyone else, and I always remain a skeptic on anything that appears to be too easy. Oh, and in answer to one more question - I never trade off news. When CSCO reports I don't even trade that day. I'm sure their are traders who mkae a living just trading off news, but it does not fit into my style. DeeMan