According to Odaily, Saniment's Market Director Brian Quinlavin discussed in an October 2 blog post how the frequent use of five major 'fear' words on social media can help traders determine if the market is overly panicked and if a breakthrough is possible. Quinlavin explained that when the market feels down, people often start using specific vocabulary more frequently. These alarming keywords, commonly referred to as 'FUD' words, can actually signal that things are about to turn positive.
The first word is 'crash.' When everyone is talking about a crash, it usually means prices have plummeted, and traders are in panic mode. Ironically, when the word 'crash' is mentioned the most on social media, it often indicates that prices are about to rebound. The same applies to the words 'sell' and 'dead.' Quinlavin noted that when traders start frequently using 'sell' and 'dead,' it typically means recovery is imminent, creating opportunities for the brave.
The fourth fear keyword is 'crackdown,' which refers to regulatory and legal pressures that make traders feel constrained, worrying about government actions or the potential outcomes of new or ongoing lawsuits. Quinlavin stated, 'This concern can drive prices down but often presents good buying opportunities, especially when the panic seems exaggerated.'
The fifth word is 'liquidation,' a double-edged sword depending on market direction. Typically, social media investors use the word 'liquidation' when celebrating the losses of those shorting the market. Quinlavin mentioned that an increase in short covering has 'historically been an excellent opportunity for new buyers to enter.'
In conclusion, Quinlavin suggested that taking a contrarian approach to social media sentiment 'often' proves to be the right decision.
