Can stock news make an impact in intraday trading? Sure it can. Amarin shares gained 20% in just 5 minutes of trading when the biopharmaceutical company announced the notification of patent allowance for AMR101, an ultra pure omega-3 fatty acid developed as a treatment for patient with high triglyceride levels. AMRN stock was trading for $10.40 per share at the time of the announcement. Volume was as low as 10K shares per minute but during the next five minutes more than 5 million shares exchanged hands. The stock has pulled back to $11 and it’s now trading at $12 per share.
That was a remarkably impressive move I hear you say, but how much money can a day trader make, taking advantage of the momentum that the stock news caused? Say the day trader has at least $25,000 in their trading account in order to be able to day trade. That gives them the equivalent buying power of $100,000 (4-1 leverage) for US stocks. Since they are following strict money management rules, day traders won’t risk all their available funds on just one stock. Let’s assume they buy 1,000 shares at $10.40 right at the start of the uptrend for $10,400. Setting a stop loss order at $10.10, they stand to lose $300 which is no more than 1.2% of their bankroll.
At the second red candlestick the momentum day trader is selling their AMRN shares. Due to slippage in such a volatile market at the time, we will assume they exit at $11.80. Their final profit is $1.40 per share, so their capital has increased by $1,400 in a couple of minutes. Trading of Amarin stock is over for the professional day trader and he is off to other trading opportunities. Maybe another stock news is about to be published and wants to be first in line.
Obviously [intlink id=”14″ type=”category”]stock news[/intlink] can move stock prices considerably. However day traders need to be on the lookout for news that will actually make an impact in stock charts, because not all news will have that effect on a stock’s price. Still, AMRN stock was a great example of how much a company’s announcement can move the stock’s price during intraday trading.
Amarin shares have been traded for $250 back in 2002 and perhaps this patent allowance announcement will be just what Amarin shareholders needed. Don’t forget to take a look at the monthly stock chart where you’ll see that during 2009 AMRN stock was as low as $0.50 per share!