fading upgrades + downgrades ( not post earnings )

Discussion in 'Trading' started by SethArb, Nov 6, 2006.

  1. I was trading ABX today

    actually scratched on a few thousand shares
    but tried to hedge in NEM ( did ok )
    and in SLV ( did not do so good )

    as I was caught up in the moment

    "fading some "starmine analyst expert " who

    "Downgraded" ABX today

    now I do not really think mining stocks
    are your typical stocks ... meaning

    if the price of spot gold and silver rally hard
    and other stocks in the mining index rally

    then it should follow that a stock in that index
    ( i.e. XAU ) should follow regardless of a downgrade

    perhaps I was lucky to scratch ... and should not fight
    the "wall street " system next time

    does anyone know how often a downgrade ( or upgrade )
    ( not post earnings ) results in a major move at the end of the day in the direction of the downgrade ( or upgrade ) ?
  2. i traded tons of them, and what i know it's that u make more money goin' long the upgrade and goin' short the downgrade...especially if it is an sp500 company. can be faded allright, often half a hour after the open. but then again i also may be biased since i was selectin' those more likely to go in the direction of the gap.

    towards the close it can be volatile, but havent noticed any stats difference from any gaps.
  3. thanks for your reply ...

    I assume that an upgrade or downgrade is esp powerful

    if the stock makes a higher high or lower low than the prior day ?
  4. very powerful, ya, when they gap. at times they are an excellent fade tho: vlo no long ago was an example..and oil was up well..still stock took a huge tumble at the open..that was my first contrarian upgrade trade and worked well.

    hedgies play them often...at least they played 'em in the past and the public pilin' in creates a wave of 1-way orders that pushes the stock in one direction. 'sure' money are multiple upgrades, more so than multiple downgrades that can still be bot for a variety of reasons.

    i still trade them at times, outside reportin' season, u can find a decent edge there.