Analysts have been working on a way to use social media effectively when it comes to investing, so much so that the Bloomberg terminal for professional traders offers Twitter analytics.
And while no one has found a surefire way to trade using this constant string of data, the newly elected president, Donald Trump, may be their answer.
It turns out that when someone as important as the president of the United States tweets about companies, it has a lasting effect.
Take a look at this chart showing Toyota Motor Corp.’s share price (gray price line in the top part), the amount of tweets about the company (blue bars in the top part) and the positive or negative sentiment of the tweets (in green and red at the bottom).
Source: Bloomberg terminal via CNBC
You will notice immediately that when shares of Toyota tanked after Trump tweeted about the company, tweets spiked in volume and had a very negative sentiment. Even as that sentiment eventually turned positive, shares continued to slide. That’s the power of the president of the United States — in real time.
The Twitter universe quickly decides whether Trump’s tweets have a positive or negative meaning, and the market reacts to that sentiment.
If Trump continues to use Twitter in the same manner, this will prove to be an important indicator to add to your investing toolbox.
Chad Shoop, CMT
Editor, Automatic Profits Alert