Day traders love volatility, and it looks like there is going to be some action in the markets with Donald Trump taking office in just a matter of days. Now, whether you like him or not, Trump is making day trading great again and already creating opportunities.
Active traders and investors are always on the hunt for market-moving catalysts. Traders such as Dennis Dick, a proprietary trader at Bright Trading LLC, and Jason Bond know that Trump’s tweets and comments are market-moving catalysts and algorithms could be trading off Trump’s tweets.
Trump is more outspoken than previous U.S. presidents. With social media platforms around, traders and algorithms are following Trump to catch wind of all his messages in real time because they affect the markets. What makes Trump so interesting is that he is posting his ideas and thoughts on Twitter, so anyone who is following him should see some trading opportunities arise.
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Former presidents have typically been vague in their dealings. Trump’s tweets are unprecedented. He is very direct, outlandish and will not hesitate to criticize companies or industries. Moreover, these tweets are directly coming from his mind and fingers, he does not have a staff member managing his account.
Generally, day traders complain about how there is often a lack of volatility and how the central banks have too much influence. However, Trump has the ability to bring back volatility through his tweets. In a way, Trump’s tweets are helping day traders by adding some volatility and giving breath to some industries and sectors.
Jason Bond, a stock trader who mentors and teaches traders, said, “We have seen the impact Trump’s tweets could have on stocks and ETFs. Trump’s Twitter account is a ‘weapon’ that traders can’t afford to ignore because they could create trading opportunities.”
Let's look at how his commentary has affected some stocks and industries.
Trump sent down two major aerospace stocks
On Dec. 6, 2016, Trump tweeted the cost of Boeing’s new 747 Air Force One was too high, prompting a “cancel order” comment. Market participants were quick to notice this tweet, causing shares of Boeing Co. (NYSE:BA) to open up over 0.50% lower.
As shown in the chart below, Boeing opened at $150.84 the day Trump tweeted about the cost of Boeing’s Air Force One, 0.87% below the previous day’s close. Thereafter, Boeing hit an intraday low of $150.02, 1.41% below its closing price on Dec. 5.
Now, this was not the only time Trump’s tweets influenced the price of a particular stock or industry. Just six days after Trump tweeted about Boeing, he tweeted about Lockheed Martin Corp. (NYSE:LMT) and the cost of its F-35 program.
Trump’s tweet about Lockheed Martin came early in the morning and market participants were able to digest the news for a few hours before the market opened. This was bad news for Lockheed Martin, as the market priced this in.
Take a look at the chart below:
Trump’s tweet caused shares of Lockheed Martin to gap down by 2.99%, but the selling did not stop there. The stock hit an intraday low of $245.50, a 5.40% drop from the previous close. The tweets about Lockheed Martin’s F-35 costs did not stop there either.
On Dec. 22, 2016, Trump started a “bidding war” and asked Boeing to price an upgrade of its F-18 Super Hornet jet, which could replace Lockheed Martin’s F-35.
This caused Lockheed Martin’s share price to hit a low of $251.10, over 0.50% below the previous day’s closing price. However, the following day, Lockheed Martin fell to a low of $247.01, over 2% below its closing price on Dec. 22. Here is a chart of how Trump’s tweet sent Lockheed Lower lower:
Traders and investors are starting to give Trump's tweets more attention if they are related to any company or sector.
Trump moved ExxonMobil and the energy sector
On Dec. 13, 2016, Trump tweeted about his selection of ExxonMobil (NYSE:XOM) CEO Rex Tillerson for secretary of state.
Trump’s selection of Tillerson as the next secretary of state changes the regulatory landscape of the oil business, a benefit for Exxon and energy companies.
Markets were quick to price this commentary in at the open. ExxonMobil opened up 1% higher and closed up 1.76% from the previous day’s close. Look at how Trump’s tweet sent the stock higher:
Additionally, this tweet caused the Energy Select Sector SPDR ETF (XLE) to open up 0.75% higher and closed up 1.13% higher from its closing price on Dec. 12, 2016.
Trump persuaded Boeing's CEO with his tweets. He told the president-elect Boeing would build a new Air Force One fleet for less than $4 billion. Trump’s comments differ from rumors, such as buyout rumors from Twitter, and unverified reports, which typically move stocks, because his tweets have proven to have a pull and impact companies and sectors.
Trump and General Motors
On Jan. 3, Trump kicked off the morning by tweeting about General Motors (NYSE:GM), threatening the automaker with a big border tax if the company did not make its Chevy Cruz model in the U.S. GM hit a premarket high of $35.26 at 6:56 a.m. EST before falling to a premarket low of $34.22 at 7:31 a.m. That is a fall of nearly 3% from the premarket high to the premarket low.
Trump sends cybersecurity ETF higher
President-elect Trump has been very vocal about hacking. To start the year off, he tweeted about hacking defense, or cybersecurity.
This one tweet was a catalyst for the PureFunds ISE Cyber Security ETF (HACK). The ETF closed up 1.69% on Jan. 4 since the tweet could have been indicating that Trump would increase cybersecurity in the U.S.
Additionally, Trump said in a Jan. 11 press conference that the U.S. is highly vulnerable to cyberthreats and aims to work with intelligence and defense experts to issue a report on cybersecurity within 90 days of taking office .
Moreover, he tweeted about the report again on Jan. 17:
In just a few trading sessions, Trump sent the PureFunds ISE Cyber Security ETF up over 5% since the start of 2017. Take a look at the price chart of the ETF below:
Trump’s interviews also move the markets
Now traders need to look out for anything that Trump says, whether it be on Twitter (NYSE:TWTR) or in any interview. For example, on Dec. 7, 2016, there was a release of Trump’s interview transcript with Time Magazine where he stated, “I’m going to bring down drug prices...I don’t like what’s happened with drug prices.”
Once this news hit, the Health Care Select Sector SPDR ETF (XLV) opened down 0.79% and hit an intraday low of $66.97, or 2.20% below its previous day’s close. Additionally, the day of the release, the iShares Nasdaq Biotechnology (NASDAQ:IBB) opened down 2.20% and was down over 4.50% from the previous day’s close. Take a look at how Trump’s comment in the Time Magazine interview impacted IBB:
The bottom line
Trump’s tweets are a must watch. While Trump is not officially the U.S. president yet, he is making an impact on the market. When he assumes office on Jan. 20, you should follow his commentary closely because it will likely influence trading.
Disclosure: I have no position in any stock mentioned in this article.
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About the author:
Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. As a trader, Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.