It turns out that on Monday, news was released indicating that RBI.to was to buy another gold company called Moto Goldmines (MGL.to). I then proceeded to have a look at the MGL.to chart, and noticed something interesting. During the two days preceding the news announcement, MGL.to was already rocketing higher on the heaviest volume of the year.
What I have noticed many times with stocks is that the price moves before the news. The reason I believe this happens is that news is often leaked before it is officially released, and can spread like wildfire causing large movements in a stock.
While trading off insider information is illegal, I am absolutely confident that it occurs more often than most realize, and this is why I never watch television or trade off news flashes. By the time you, the average investor, hears a news flash on TV, it is almost certainly too late.
But there is a way that the average investor can gain an upper hand, and that is through the ability to understand charts. This is because charts leave clues as to what is happening behind the scenes. When, for example, someone with insider information buys 100,000 shares of a stock, the chart detects this information both in volume, and also in price action; there is no way to conceal this.
The chart below shows MGI.to on the top (the company being bought), and RBI.to on the bottom. Notice the top chart's behavior during the preceding two days before the "news" and the accompanying volume.
Also note the black candle that formed on June 1st, the day the news was officially released. This black candle shows how average investors, who excitedly bought the stock on this great news at the open, actually ended up buying the highest price of the day:
The bottom line is that the most important information a trader can look at is price and volume. The price is the consensus of opinion of thousands of different investors who, chances are, know more than you or I.
