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A value investor invests in a stock after looking at a number of factors such as the financials of the company, analysing annual reports, news on the stock and sector, reading the management outlook and tracking the price movement.


However, one of the key challenges for investors and even for traders is to track the sentiment around the stock on a daily basis without missing any relevant news.

However with there now being over 277,000 tweets, 571 websites created, 347 new blog posts and 72 hours of new video being added to YouTube every minute of every day, the volume of data to read and filter is growing exponentially.

In today’s world, things change very rapidly and what looked to be a multibagger two months ago can turn into a disastrous investment, if the relevant news and sentiment around the stock is not tracked regularly. Trading is all about the timely entry and exit in a stock. A gap between perception and actual reality can offer traders and investors a profitable trading opportunity using sentiment analysis across various asset classes.

‘277,000 tweets, 571 websites created, 347 new blog posts and 72 hours of new video being added to YouTube every minute of every day’

Sentiment tools allow a user to measure the sentiment of a particular news item or news flow around an instrument and evaluate its potential impact, in real-time. Let us take a look at the Stock Sentiment graph below and how you can effectively use it as a precursor to stock price movement. Apple, the world’s most valuable listed company has huge traction globally as one of the most renowned brands amongst consumers, on both mainstream and social media. Let us take a case study of Apple’s price movement compared to its sentiment graph.


How to view Stock Sentiment Graph


heckyl graph 1



The purple dotted line denotes the share price movement while the yellow dotted line indicates the sentiment score movement on a scale of -100 (extremely negative) to 100 (extremely positive) with zero as neutral, both displayed on an end of day basis. The orange circles represent the events that took place on a particular day on which the sentiment score was calculated. Under the price and sentiment graphs a green dash means the sentiment was generally positive for the day, while a red dash suggests negative sentiment. The blue bars indicate news message volume on that particular day.



heckyl graph 2


As we can see from the chart in the first instance (Correlation 1) between 23rd and 27th February the sentiment score moved lower from +13 to -50 and the share price drifted lower from $132 to $128. On 25th February, news broke that Apple will have to pay $530 million for patent infringements. News that Apple may face more lawsuits for patent infringement hit the mainstream media on 27th February dragging the stock lower.

In Correlation 2, between 9th and 11th March the sentiment score moved down from +88 to -19 and the share price dropped from $127 to $122. On 11th March, news broke on mainstream media of the Apple Store and iTunes experiencing outages of more than 8 hours. However, it was a temporary phenomenon and the price rebounded back to $127 on 17th March after positive news on the Apple Watch, Apple TV and new investments.

As seen from the above correlations, the sentiment score can move ahead of the price, guiding an investor or trader to predict the future share price movement. This sentiment graph allows a layman to understand how the share price can be affected by forming a cluster of news of similar topics, analysing the overall positive or negative sentiment for each cluster, thereby allowing investors to keep an eye on all the relevant news that could impact a share.

With so much news being generated every minute of every day, investors require an automated system to help them keep track of and understand the potential impact on their investments.

This is where sentiment can help investors and become a key indicator alongside technical, charting and fundamental analysis.


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