Pseudo-Seasonal Stock Trading

As I write this, a long position I have in TASR is up over 6% just half way through the day. I’m trading it based on my Band-to-Band system (details here).

Taser International makes, well, “tasers”. Turns out that’s a brand name for what is generically known as an ‘electroshock gun’. And why is their stock up? Because two police officers were shot in Ferguson, Missouri. It seems that often when some significant news event involves either the shooting of a police officer or an “unarmed black male”, TASR (and other weapons-related companies) spikes. It’s “pseudo-seasonal” in other words.

Now, setting aside the somewhat questionable ethics of this for the moment, could the average retail trader trade something like this? I don’t mean can you “trade the news”…of course you can, but you’ll probably lose as the move is made before you get in, and the profit lost before you get out.

No, what I mean is: can you trade the “anti-news”?

I got into the TASR position because of technical considerations, not because of any news event. Or rather, the news event that triggered my technical signal was of a disappointing earnings report, not a ‘real’ news event. I got in at the right time, BEFORE the real news happened.

So…could you time the position entries so that they occur in between news events, so that you’re already long when the news event happens?

For example: what if you evaluated the frequency of news stories involving the words “shooting” and “police officer” or “black male”? What if you determined that these stories made the national news with a certain frequency, and with a certain minimum spacing between the events? Could you then wait X days after the last news event to enter a position, primed for the next one? Or calculate the average price drop over time after each news event, and put your buy order in after the price dropped the required amount?

I realize this particular news topic is less than savory, and I’m NOT suggesting you trade it. But it’s current and it’s what got me thinking about this oddball idea. It’s sort of like seasonal trading, but different. It’s more of an anticipatory news-event trading system.

I don't have any photos of tasers or weapons, but I do have a photo of an apple. Beautiful model holding it is an extra bonus.
I don’t have any photos of tasers or weapons, but I do have a photo of an apple. That a beautiful model is holding it: extra bonus!

What if for example you knew approximately when Apple (AAPL) was going to make major product announcements – which is not too difficult to figure out – and then shorted Google (GOOG) a few weeks before. Since they’re competitive in many areas, good news for Apple could be bad news for Google and vice versa.

I haven’t checked to see if there’s a correlation or not, but you get the idea. Google was down 2.7% for the five day period after the Apple Watch was announced (September 9, 2014). But that’s just a single test.

Whenever you hear about a significant news event, it might be beneficial to consider a) is the news event cyclical or “pseudo-seasonal” in some way, b) how could I have gotten into the position before the event occurred, and c) what companies or industries are effected positively or negatively by the news?

What are some other news events you can think of that could be traded in an anticipatory or “anti-news” manner? I’d love to hear them, so leave your idea in the comments. Or contact me privately if you don’t want your brilliant idea to be public knowledge. 🙂

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