What makes a stock go up or down? Any number of things; things we call catalysts. A catalyst by definition is something that causes an important even to happen, such as a stock going up! You will often hear people saying that a particular stock needs a catalyst to get it moving. This means that the stock needs some good news, SEC filings, insider trades, block trades and more.

Some basic catalysts:

Positive News and Announcements

These could be press releases on new products, partnerships, strategies or problems that might improve or diminish the company's chances of success, and for news reports on new products, strategies, alliances or trouble.

Insider Trades

Many investors believe that company insiders or employees are a good indicator of how well a company is doing and how well its stock will perform. If you see the CEO for example, buying 10,000 shares it is often a very good sign for the stock because people assume that the CEO believes that his shares are going to increase in value. Insiders are often very early buyers of their own stock and get good prices on it.

SEC Filings / Regulatory

Companies are required by law to disclose certain material facts about their businesses to federal regulators every 3 months. Some examples are insider trades and restricted stock sales, ownership changes, special events and other critical shareholder issues. Other regulatory issues could be the listing or delisting of a stock from a particular exchange.

Block and Institutional Trades

Block or institutional trades of a large number of shares; normally 100,000 or more normally mean that someone is so confident in a stock that they are literally pouring money into it. Institutions spend large amounts of time and money analyzing a stock before buying it. Investors believe that if it passes muster with the big investors then it must have a lot going for it.

Positive Mentions

Positive mentions by analysts, newsletters, television and more sources can often be a positive catalyst on a stock. Many investors follow these sources closely.

Conclusion

Although it is easy to see how many catalysts will have some sort of an affect on a stock, one should not invest solely on catalysts. There is a lot more analysis and research that goes into purchasing a stock. Many times very positive catalysts will actually have negative effects on a stock and the price will go down sharply. For example many people may have been holding a poor performing stock for sometime and have sell orders to get rid of it as soon as it goes up slightly. Many of these orders will execute as the shares start to go up and likely trigger a sell-off. There are many other instances that control how catalysts affect stocks. These will be the topic of another article.