What is a Stock Sympathy Play & How to Use It in Your Trading
★ SUMMARY ★
On today’s video episode, what I’d like to do is share with you What is a Stock Sympathy Plays, and how can you use it within trading or why you may use it in trading.
I find that this happens a lot during earnings or people will trade the sympathy plays throughout earnings and sometimes it happens due to sector, sector news, rules and regulations that also impact things.
It’s something to be aware of. I don’t use this technique a lot in my trading but there are certain situations where as you see things happening and evolving you may decide to trade based on a sympathy play.
Defining Sympathy Play
To get things started, first off what is a Sympathy Play? Well, Sympathy Play is something that you go ahead execute and play based on something related. So if we go ahead and look at a watermelon and you also take a look at an orange, these are fruit and they are related.
They’re related to one another, in terms of them being fruit. Now in the stock market you also have relationships that work together and they work together in really unique way. So for example, what you may end up happening or having the relationship is you may have Bidu, which is a search engine, Chinese search engine and then it also relates to for example like the Googles.
Now, you can also say that Bidu is also related to the Yahoo, so Yahoo and Bidu is also related from one another because these are all search engine based.
Now if we take things a little bit further, you can also say that Yahoo is also related to Alibaba, so these two are related and these two could be a potential sympathetic play if something happens to one or the other.
Really, what you’re doing here in this situation is you’re mapping out relationships, that’s what it really comes down to when you start looking at all different stocks and how they move, how they trade, is that it really comes down to relationship.
Relationships in trading
Now you have a basic understanding of what relationships in the stock market, but how does this play out in trading? Well, let’s say for example that there is a big wig, or a pretty wise guy, it could be a serious investor, that’s really interested in investing in one of these companies.
It could be Bidu, Google or Yahoo, whatever the investment is, he’s interested in one of them because he’s betting on these search engines, he’s betting that search engines are going to be huge in the future. It could be that because internet is going to explode in the future, but in either case he’s looking for search engine growth.
So, what he does is let’s say he invest in the Google, so once he invest in Google, he’s betting on search and this investment could propel that stock extremely high. Now, he might’ve gotten into this investment right around here and this stock exploded and continued to move to that upside and now it’s currently somewhere all the way up here, it’s very high.
It’s already moved, past let’s say fair opening price or a price that you would want to get into, it’s way beyond where you’d want to get into.
Posted at: http://tradersfly.com/2016/03/stock-sympathy-play/
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