Up until very recently, Tesla Inc. (NASDAQ: TSLA) was up ten days in a row, and that’s awesome!
TSLA One-Month Chart; 1-Hour Candles; SteadyTrade
I mean you could have made around 45%…if you bought it ten days ago.
So for anyone who…
Could afford to buy TSLA stock…it’s pretty expensive and not accessible to a lot of traders and investors.
And…
Got in ten days ago…Congratulations!
But what about the rest of us?
The EV sector is hot right now. Can we capitalize on it too?
The answer is, “Yes, you can!”
Let’s talk about stock sympathy plays. Sympathy plays let you trade on the news and price action of otherwise inaccessible stocks, like TSLA.
Table of Contents
What are stock sympathy plays?
Stock sympathy plays occur when the price movement of one stock influences the price movement of another stock within the same sector or with a similar business model.
Basically, when a company experiences significant news, positive or negative, it often creates a ripple effect, impacting other companies that operate in the same space.
How do sympathy plays work?
Imagine a leading company in the tech sector reports stellar earnings, smashing analysts’ expectations. The excitement and bullish sentiment naturally boost the stock of that company…
It probably also boosts the stock of other tech stocks, even if it’s been a ho-hum news day for those other companies.
Best of all for traders with small accounts, lower-priced stocks, even penny stocks, in the same sector, can react positively.
But remember, bad news can work conversely and trigger a sector-wide downturn.
How to identify sympathy plays:
Stay Updated with News: Keep an eye on major financial news outlets, earnings reports, and sector-specific news.
Being on top of all the news all the time can be tedious and a real pain in the “you-know-what.”
Fortunately, we have a proprietary news service that does most of that heavy lifting for you.
Breaking News Chat is our chatroom led by seasoned Wall Street veterans and it puts you ahead of the curve. It alerts you immediately to fast-breaking news that can send a stock soaring.
Understand Sector Relationships: Know which companies are related and how they might influence each other. For example, in the semiconductor industry, if a key player like NVIDIA Corp. (NASDAQ: NVDA) reports strong earnings, it might help other semiconductor stocks like Advanced Micro Devices Inc. (NASDAQ: AMD) or Intel Corp (NASDAQ: INTC).
Analyze Price Movements: Use technical analysis to track how related stocks are reacting. Look for patterns and correlations that show a sympathy play is in motion.
Act Quickly: Sympathy plays can happen fast. Be prepared to enter and exit trades quickly to capitalize on the momentum.
Let’s look at some other EV stocks that benefited from TSLA’s run.
Our proprietary algorithmic tool, Oracle, alerted us to a spike in ZAPP Electric Vehicles Group Limited (NASDAQ: ZAPP) on July 9th.
After ZAPP hit the Oracle entry signal, it topped out at $19.10 per share for a total return of 42.96%*.
ZAPP Oracle Chart
Another profitable EV sympathy play was on June 26th in Faraday Future Intelligent Electric Inc. (NASDAQ: FFIE).
Oracle alerted us to this one and from the entry signal price to the day’s high, FFIE returned 81.8%.
FFIE Oracle Chart
And just last week Nikola Corp. (NASDAQ: NKLA) gained approximately 45% in less than two trading days.
My final thoughts:
As you can see, sympathy plays are an easy way to piggyback on the news and price action of larger, more expensive stocks.
Remember, the key to successfully trading sympathy stocks is to stay informed, act quickly, and effectively manage your risk.
And one more thing about Tesla…
There’s another way to get in on the action of Tesla without buying TSLA stock.
See, Elon Musk is making a pivot towards a $23 trillion market that has nothing to do with SpaceX, Twitter or cars.
And it’s not just TSLA that will benefit….
The growth potential of this $23 trillion market could also send Tesla’s five small “silent partner” companies soaring.
Find out more about Project X here.
Have a weekend everyone. See you back here on Monday.
Tim Bohen
Lead Trainer, StocksToTrade