In the age of social networking, social sentiment ; or public mood surrounding a given topic on social media – is affecting the stock market like most other aspects of life. Here’s a very recent example.
An e-commerce company specializing in handmade / vintage items and craft supplies, Etsy enjoyed a 300% plus increase in its share price compared to its average stock price in the last 12 months primarily because of this single tweet from Elon on January 26th, 2021. Retweeted thousands of times within minutes of posting, his tweet quickly created a positive buzz for Etsy on twitter and beyond; influencing investors to buy more Etsy stocks and thus causing its price to go upwards.
This is definitely not the only (or even the best) example of social media influencing stock price movement. But the point here is, if enough people are speculating online about a particular stock price going upwards or downwards; you are likely to find it worth your while to be aware of that as a trader or an investor.
Social sentiment analysis is no walk in the park, unfortunately. It requires powerful algorithms to go through vast amount of data shared on social media and analyze them to decide the correct tone (positive,negative,or neutral) of a message on any given topic (in our case, stocks). There are websites and softwares which can do this for you at a price. But if you are still undecided whether paying for social sentiment analysis can actually add value to your overall investment strategy, we are here to help.
In no particular order, here’s a list of free stock screeners jacked with social sentiment ranking for you to check out before you can decide whether you would like to upgrade to more advanced analytics services. Important to mention that while most of these sites aren’t directly tapping into data from major social media platforms like twitter, reddit, facebook etc. (In other words, you get what you pay for), they are still some of the largest platforms frequently used by today’s investors/traders to share and gather ideas about stocks they are interested (or not interested) in. So if there’s a buzz surrounding a particular stock or related event, it will definitely reach here fast. To be on the receiving end, all you need to do is open a free account with your mail id.
With more than 1.5 million users, Stocktwits provides a platform not much unlike twitter where investors can share their sentiment online about whether they think the price of a particular stock is gonna go up (bullish) or down (bearish). When sharing messages on the platform regarding a particular stock, the user gets to choose between two options titled “Bullish” and “Bearish”. Stocktwits then aggregates this data to show on its scanner the percentage of bullish or bearish clicks a particular stock has attained over a seven day period. It also tracks message volume to show you how many users are talking about a particular stock on their platform during that same time frame.
Scutify offers a similar platform like Stocktwits where users can share whether they think a particular stock is bearish or bullish with the click of a button. But unlike Stocktwits, Scutify also provides brokerage services – meaning that you can trade in stocks, options and more through their website against a minimum deposit. This allows them to add an additional feature to their sentiment analysis which can be very useful to cross-check accuracy of user sentiment surrounding a particular stock. Before delving in further though, let’s discuss (or recap, for those of you who are already familiar) what “options” are in financial trading.
An option is a financial product which gives you the right to either buy or sell a given stock at a given price (a.k.a strike price) within a given future date (expiration date). You pay a premium to hold that option and this premium is set according to the value of the underlying stock among other factors.
So how do you use options? let’s consider the only two scenarios that matter – Bullish (stock price is going up) and Bearish (stock price is going down).
If the stock price is going up and you are holding a buy option, you get to buy said stock at a predetermined price while the price is likely going ever upwards. Your return (or profit) is the difference between the market price of the stock and the predetermined price at which you bought. So a positive return (measured in percentage) would mean the predetermined price is lower than the current market price of the stock. A negative return (or loss) would mean the opposite. In summary, if you feel that the stock will likely follow a bullish trend; you would want to hold a buy option.
Conversely, If the stock price is going down and you are holding a sell option, you get to sell said stock at a predetermined price while the stock price is likely going ever downwards. Your return (or profit) is the difference between the predetermined price at which you sell and the market price of the stock. So a positive return (measured in percentage) would mean the predetermined price is higher than the current market price of the stock. A negative return (or loss) would mean the opposite. In summary, if you feel that the stock will likely follow a bearish trend; you would want to hold a sell option.
For any given stock, Scutify shows the list of users who have bought options on it through the website, the strike price for that option as well as the expiration date, in addition to their provided sentiment (bullish/bearish ; option holders with bullish sentiment would hold buy options and option holders with bearish sentiment would hold sell options). If said options have already reached their expiration date, Scutify compares the stock price at the expiration date with the strike price to measure the return for said user. Thus it creates a list of 3 users with highest returns against a given stock, as well as a comprehensive list of all users with their provided sentiment and return percentage. So you can actually decide for yourself which users are worth following based on their return. Pretty neat.
If you wanna focus more on blogger sentiment and news sentiment surrounding your favorite stocks, Tipranks would be an excellent place to start. The ‘Stock Analysis’ feature on their website provides bullish/bearish sentiment based on aggregated blog posts and news articles. Though you can enjoy these features along with other standard scanner services under their Basic plan for free, you would likely benefit more by upgrading to their paid services which unlock some of the more comprehensive analytics features they offer.
The only free scanner on the list that actually delves into the massive stream of twitter data, Hashfinance creates a Social MACD pattern of your favorite stock based on their twitter surfing to show you the stock’s current social sentiment trend – Building, Flat, or Falling. Still in its infancy, we are expecting Hashfinance to gear up with more services soon on its already robust website.
In conclusion, it’s always best to enjoy any free service with a pinch of salt. That being said, these are some of the best free websites out there being used by a big chunk of the e trading community and holds a lot of credibility for the services they provide. Thus, we expect your investment strategies to benefit significantly from utilizing these resources.