Question

Is sentiment analysis really a good indicator in the immediate short-run when trading stocks? (Please explain without using too much business jargons if possible.)

Answer 1

1.FOR A SHORT TERM PERIOD IT MAY WORK BUT IF INVESTOR WANT TO GO LONG THEN U NEED A FUNDAMENTAL ANALYSIS ALSO

IF INVESTOR WILL GO LONG U NEED TO UNDERSTAND COMPANY'S OPERATING CASH FLOWS AND DEBT STRUCTURE

2 IN A SHORT RUN BY UNDERSTANDING INVESTOR POINT OF VIEW WITH USE OF TECHNOLOGY U CAN PREDICT THAT WHETHER MARKET WILL BE BULLISH OR BEARISH. BY TRACKING INVESTOR ACTIVITY U CAN PREDICT IT ALSO...THROUGH WHICH U CAN UNDERSTAND TREND ON A PARTICULAR STOCK

3 FOR EXAMPLE ON A PARTICULAR STOCK SENTIMENTS ARE POSITIVE DUE TO HIGHER DISTRIBUTION OF DIVIDEND AND THEREFORE PEOPLE ARE PURCHASING SUCH STOCK ...BUT IF U DO A FUNDAMENTAL ANALYSIS U KNOW THAT HIGHER DIVIDEND IS NOT A GOOD DIVIDEND POLICY IT SHOW THAT LESS GROWTH IN FIRM U WANT TO RETAIN INVESTORS BUT A SENTIMENT ANALYSIS MAY NOT PREDICT THIS IT MAY REFLECT A POSITIVE IMAGE FOR A STOCK

4 IN THIS IF MARKET IS BULL THEN U WILL ENTER HIGH AND SELL AT HIGH ONLY AND IF IT BEAR THEN SELL LOW AND BUY LOW SO THESE POSITIONS WILL BE ACHIEVED WHEN WE ARE IN MOMENTUM WITH MARKET BUT THESE POSITIONS CAN EVEN BE OPPOSITE OF WHAT MARKET SENTIMENTS ARE

CONCLUSION: IN SHORT RUN IT CAN BE EFFECTIVE IF U STUDY THE INVESTORS TRADING ACTIVITIES IN AN EFFICIENT MANNER AND TRACK IT PROPERLY

BUT IN LON RUN FUNDAMENTALS WILL COME INTO PLAY