Importance of Knowing Investors’ Market Sentiment in Decision-Making
How do you gauge the market sentiment?
By running a survey or observing discussions on stock market-related Facebook Groups?
But how do you verify the integrity or objectivity of their comments? That’s the problem!
Occasionally, I run surveys on Facebook Groups, but not to check the market sentiment but to ask them which stock they’d like me to write about in my next article. That way, I maintain the objectivity of my stock selection process as far as when deciding which stock to feature in my articles.
I check the overall market sentiment rating of a stock to help me decide whether I should hold my position since my trailing stop is still intact or pre-empt it.
The market sentiment also helps me estimate if the prevailing direction of the share price is likely to continue or reverse.
For example, if the stock is in a downtrend and the prevailing market sentiment is bearish, it means the downtrend is likely to continue.
If the stock is in a downtrend, but the market sentiment turns bullish, it’s a sign that investors might see a bullish reversal.
Again, and again, notice the adverbs I’m using – “likely” and “might”. We’re still talking about probabilities and not certainties.
Still, it’s better to be data-driven and be proven wrong by the market than make decisions based on gut feeling alone. The former gives you the opportunity to optimize something while the latter doesn’t.
I have an extensive explanation about why I created my proprietary Market Sentiment Index indicator in some articles on my website. Use the SEARCH box on this website and type “Market Sentiment” to read my other articles where I talked about this subject.
MTD Market Sentiment for the Top 5 Banking Stocks
I’ll share with you my findings when checked the overall Market Sentiment Index score of the five banking stocks with the biggest market capitalization using data from August 1, 2023 to August 29, 2023.
Rank: 1
Stock Code: BDO
Company: BDO Unibank, Inc.
Market Cap: P751,692,951,489
Market Sentiment Index: BEARISH
48 of the 87 participating brokers, or 55.17% of all participants, registered a positive Net Amount
33 of the 87 participating brokers, or 37.93% of all participants, registered a higher Buying Average than Selling Average
87 Participating Brokers’ Buying Average: ₱141.21234
87 Participating Brokers’ Selling Average: ₱142.10580
10 out of 87 participants, or 11.49% of all participants, registered a 100% BUYING activity
8 out of 87 participants, or 9.20% of all participants, registered a 100% SELLING activity
Rank: 2
Stock Code: BPI
Company: Bank of the Philippine Islands
Market Cap: P534,081,307,428
Market Sentiment Index: BEARISH
56 of the 87 participating brokers, or 64.37% of all participants, registered a positive Net Amount
29 of the 87 participating brokers, or 33.33% of all participants, registered a higher Buying Average than Selling Average
87 Participating Brokers’ Buying Average: ₱110.65310
87 Participating Brokers’ Selling Average: ₱113.09954
12 out of 87 participants, or 13.79% of all participants, registered a 100% BUYING activity
7 out of 87 participants, or 8.05% of all participants, registered a 100% SELLING activity
Rank: 3
Stock Code: MBT
Company: Metropolitan Bank & Trust Comp
Market Cap: P248,032,467,858
Market Sentiment Index: BEARISH
62 of the 88 participating brokers, or 70.45% of all participants, registered a positive Net Amount
25 of the 88 participating brokers, or 28.41% of all participants, registered a higher Buying Average than Selling Average
88 Participating Brokers’ Buying Average: ₱55.87203
88 Participating Brokers’ Selling Average: ₱56.83625
11 out of 88 participants, or 12.50% of all participants, registered a 100% BUYING activity
7 out of 88 participants, or 7.95% of all participants, registered a 100% SELLING activity
Rank: 4
Stock Code: UBP
Company: Union Bank of the Philippines
Market Cap: P161,349,328,745
Market Sentiment Index: BEARISH
35 of the 61 participating brokers, or 57.38% of all participants, registered a positive Net Amount
30 of the 61 participating brokers, or 49.18% of all participants, registered a higher Buying Average than Selling Average
61 Participating Brokers’ Buying Average: ₱71.93087
61 Participating Brokers’ Selling Average: ₱72.42741
18 out of 61 participants, or 29.51% of all participants, registered a 100% BUYING activity
8 out of 61 participants, or 13.11% of all participants, registered a 100% SELLING activity
Rank: 5
Stock Code: PTC
Company: Philippine Trust Company
Market Cap: P96,000,000,000
Market Sentiment Index: BULLISH
2 of the 3 participating brokers, or 66.67% of all participants, registered a positive Net Amount
2 of the 3 participating brokers, or 66.67% of all participants, registered a higher Buying Average than Selling Average
3 Participating Brokers’ Buying Average: ₱96.00000
3 Participating Brokers’ Selling Average: ₱96.00000
2 out of 3 participants, or 66.67% of all participants, registered a 100% BUYING activity
1 out of 3 participants, or 33.33% of all participants, registered a 100% SELLING activity
Personal Note: I won’t take the “bullish” rating for PTC because of volatility issues. As you can see, there are exemptions to the rule, and this is one of those exemptions.
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