One of the top trading strategies you’re going to hear about is sympathy plays. That’s because they’re one of the best ways for new traders to take advantage of a hot sector.
Now, when we talk about hot sectors, quite often the leader is a higher priced stock. That makes it difficult for many new traders to trade them.
Many of the sympathy plays are penny stocks, which makes them ideal for traders with small accounts. In fact, that’s exactly what Jack Kellogg did during his amazing run in 2020…
Wednesday, June 24th at 8 PM ET
Tim Sykes hosts Jack Kellogg for an urgent market briefing
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Table of Contents
The Big Picture
This market we have right now is perfect for sympathy plays. The first thing you have to think about is…
What Sector Is Hot?
Hot sectors come and go. For example, quantum stocks were hot at the end of May after the government announced it would invest in nine quantum computing companies.
Another example is space stocks. A lot of space stocks ran during the SpaceX IPO hype and roadshow.
Now, with sympathy plays it’s very simple.
Once you know which sector is hot…
Create a Sector Watchlist
If you’re using StocksToTrade it’s easy. There’s an “Info” section with a “Related” tab. You click on that and you’ll see the sector, the industry, and the sub-industry. Then you’ll see a list of related stocks.
Next, do your due diligence. Go through the stocks one at a time and see if the charts fit the patterns. If they’re not interesting, get rid of them.
Those that are left on the list will often move with the leader. Now, that doesn’t mean they’ll all be trades. Some might be big companies that move too slowly. Or they’ll have a huge float.
Maybe you’ll find a few true pennies. I prefer not to trade true pennies. I’m not saying don’t trade ‘em, so don’t get me wrong. I love dollar cross plays. I just have very specific criteria.
Once you’ve identified interesting stocks in the sector, you check that list every day. Especially when you hear news about the sector leader.
Then, every day you sort your sympathy play watchlist by volume.
Why?
Because with sympathy plays, it’s all based on…
Who’s Going To Pile into the Next One?
The way you get ahead of that is, you run a scan looking for the highest volume stocks in that sector. What you’ll end up with is the most active stocks.
Then, you look for all the associated chart patterns in the most active stocks.
Now, it could be one of many patterns or algo alerts.
It might be an Oracle algo signal or a dip-and-rip. It might be a weak open red to green. It could be an RCT or afternoon VWAP hold. Remember, trade the patterns.
My Take
When it comes to sympathy plays, and it doesn’t matter what the hot sector is, we’re always going to follow the leader. Then, run your scan and trade the big gainers, with the most volume, where the price action follows one of the patterns. That’s what I do
Watchlist
Today’s watchlist stock was an after-hours runner on Thursday.
Sagtec Global Limited (NASDAQ: SAGT) spiked on news that the owner and CEO bought 1.5 million shares.
SAGT, 6/18/26, after-hours insider trading spiker, set a nice RCT
As you can see, SAGT put in an RCT at $1.49 x $1.39. Anyone who’s read my RCT series starting here could’ve traded that.
On My Radar
- Charles Schwab is getting into prediction markets? My friend, just learn to trade and ignore that nonsense.
- Remember Allbirds (NASDAQ: BIRD)? The shoe seller turned AI company is now Smartbirds and the newly appointed CEO has a plan but no employees.
- Meanwhile, BIRD took flight last week (pun intended).
- My video on how to use StocksToTrade to quickly find sympathy plays