How to Tell Which Stocks Retail Traders are Choosing

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Since the recent headline-grabbing events of GameStop GME and WallStreetBets, more eyes have been focused on what retail traders and investors are doing than ever before. The overall number of individuals with brokerages and retail investors starting out is breaking all previous records - these traders and investors will likely continue to have significant influence in the future, and should always be considered a crucial component to the financial ecosystem. Finding ways to figure out the trends in retail investing and trading may be more important now than ever.

A tool like TD Ameritrade’s Investor Movement Index (IMX), a proprietary, behavior-based index designed to indicate the sentiment of retail investors, might prove useful to understand the direction and outlook of retail traders and investors. The IMX measures TD Ameritrade’s clients who traded at least once in a month and helps to provide a qualitative and accurate approach to understanding investor sentiments, trends and choices on both a broad and targeted scale.

Recently, Benzinga sat down with TD Ameritrade Chief Market Strategist JJ Kinahan to discuss the IMX. Regarding the value of an informational survey index like the IMX, Kinahan said, “The IMX shows, what people actually traded, not what people said they were going to trade, it’s what they actually traded. The IMX gives a real, true picture of the exposure that the retail investor at TD Ameritrade is actually taking in the market.?

Cutting out the Noise

Being able to tune out the various opinions in the market and instead hone in on the actual numbers and trades is a valuable quality of the IMX. Additionally, the individual investors measured in aggregate in the IMX may be a more effective signal of the overall sentiment of the market rather than any single trader’s actions.

“We’ve found that people who take the time to do a little bit of research or at least interact with the market once a month are making really good decisions overall,” Kinahan said.

In total, TD clients were net buyers and purchased both equities and U.S. stock ETFs. Stocks such as Disney DIS, Viacom VIAC, Advanced Micro Devices AMD, QuantumScape QS and Palantir PLTR rounded out the list of some of the hot picks retail investors were buying the most on the IMX in April. 

On the sell side, Johnson & Johnson JNJ, Wells Fargo WFC, Pfizer PFE, United Parcel Service UPS and Nvidia NVDA were names that sold on strength in April. 

The IMX index in April was down slightly from its March reading, which was near all-time highs, and is still considered to be relatively high. Investors and traders who are interested in tracking the retail investment sector may want to pay attention to the IMX as 2021 continues.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.