One of the toughest challenges for traders is resisting the urge to trade.
It takes guts…discipline…and patience to make it in this game.
I’ve made over $7.4 million in career trading profits and have coached several people on their journey to becoming millionaire traders. So I know what’s possible.
Some days, there is simply nothing going on…the price action is choppy, and the trading volume dries up.
But then there are those days…like yesterday…where a former Supernova wakes up and explodes…creating a frenzy of potential opportunities in several stocks.
If you don’t know what to look for, you’ll likely miss out on some true money-making action.
But if you continue reading, you’ll be more than prepared…not only for this opportunity…but for several others that come along…
In fact, if you want to succeed as a trader, you need this tool in your arsenal.
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Big Earnings Surprise Could Spark Another Rally In These Stocks
Everyone’s favorite “meme stock” shocked Wall Street on Tuesday night when it posted its quarterly earnings.
GameStop (GME) posted Q4 adjusted EPS of $0.16…significantly better than expectations of $(0.13). In addition, it posted Q4 sales of $2.23 billion…above the street’s estimate of $2.18 billion.
The stock rallied by more than 40% in the after-hours on Tuesday.
Why should we care?
GameStop was responsible for two major themes in the market in 2020 and 2021.
The first was to bring attention to highly shorted stocks. GameStop became a Supernova largely because it was a heavily shorted stock…the retail buying frenzy behind it caused one of the most memorable short squeezes recently.
Traders piggy-backed off that idea and started looking at other stocks with high-short interest.
They started buying up shares in stocks like AMC Entertainment (AMC), BlackBerry Limited (BB), and Bed Bath & Beyond (BBBY)…which also experienced notable short squeezes.
Second, GameStop became popular on online forums like Reddit…creating a brand new category of stocks called “meme stocks.”
This week’s positive earnings report could create several sympathy plays.
What are sympathy plays?
A sympathy play is when an investor buys stock in a similar sector or experiences a similar catalyst.
GameStop is in two categories: high short-interest stocks and meme stocks.
While it doesn’t appear that GameStop’s earnings will spill over to other stocks in its category, it’s essential you learn how the sympathy play works.
How To Capitalize On Sympathy Plays
Look For Ultra-Niche Sectors. Some ultra-niche sectors include space travel and exploration, cannabis, cryptocurrencies, electric vehicles, and AI.
Whenever there is a positive catalyst in a stock in an ultra-niche sector, it has the potential to lift other stocks in the category up.
Why is this important?
Because if you miss the first move…you have an opportunity to catch the second.
Some News Catalysts Can Create Sympathy Plays.
The two of the biggest news catalysts we’ve seen in 2023 that have created sympathy plays are companies attacking short-sellers and AI.
For example, Genius Group Ltd. (GNS) went from $0.60 to $8 largely because its press releases stated that it would investigate short-sellers.
This caused other companies to issue similar press releases…We saw them in ticker symbols ENZ, HLBZ, MULN, and many others.
When AI was the hot news story…we saw major moves in ticker symbols AI, BZFD, MOBQ, and an army of others.
How To Take Advantage Of Sympathy Plays
Pay attention to the news catalysts. If a company issues a press release and its stock experiences a spike…traders will naturally look for other stocks in a similar sector or with similar news.
One way to get ahead is to create a list of stocks that fit in a niche. The beauty of Supernova spikers is that they sometimes come back. If you have a list of stocks ready to go…you’ll be able to act quickly once the news hits.
If you’d like to learn more about this and how I’ve mentored over 30 of my students on their journey to becoming millionaires, check this out.
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