Is anyone trading brokerage houses' up/downgrades ? I have analysed the data over the last 2 years and found some tradeable strategies, but I would like to hear from someone who has done so over the past, about his/her experience. Anyone who's interesed in sharing data, please let me know. Oliver
I did that a few years ago. I made a worksheet that helped me narrow the choices and I could pick the top two by my criteria and nearly always the best one of the day, close over close, would be in those two. The problem was entering on the gaps up, I just never could get past the open on the things. Do they gap like crazy like they did back in 1999?
I used to work for a guy that was a MM in the IBM options pit at the CBOE. One morning Merrill Lynch upgrades the stock, and raises their projections on both revenue, EPS, and target price. Ok, so now it's 8:31 CST, right as the market opens, a clerk is quoting the stock, "82 bid, offered at 82.30 Merrill with size on the offer " They loved this stock soooooooo much they decided to clear out their entire long position !! By the way, my numbers may be off, but after opening up a couple of bucks, the stock closed lower on the day, and didn't hit either the target, or that same price level again for months. Stock was good enough for everyone else to buy and hold, but although they told everyone how great it was, they were the biggest seller all day !!! Vega
I'm thinking of following more the "advice" of the smaller, unfamiliar brokers. Indeed, following MLCO, MSCO, GSCO etc is at best a break-even strategy. Unfortunately, fading them doesn't work either. Oliver
Gaps make the backtesting a nightmare because the opening price will be very unstable and execution at the open price is unlikely (slippage!!!) Oliver
If its an NYSE stock you should never have slippage on the open because you would be able to get that opening print with a pre-market order. On the nasdaq's I totally agree, I have tried some backtested strategies that assumed the opening price and I very rarely get the opening price on stuff that gaps (which obviously upgraded/downgraded stuff would tend to do). In order to play the upgrade/downgrade game however you would need to take a lot of things into account IMO. Zacks and some other websites for example take that stuff into account but different upgrades are weighted differently. For example if it is the a stocks first upgrade in 6 months, that is obviously more significant that MLCO upgrading it after 3 other firms did the week before and the stock ran up 30% over the past N days. The "intraday" upgrades and downgrades are probably more playable for most of us as you can often catch 10-30 cents off of those if you have something that alerts you to the mid-day stuff.
Regarding Nyse quotes: yes, the opening print is easy to get. but impossible to backtest since all quote providers also take trading on secondary avenues (such as the ECN or regional exchanges) into account for the historical opening price. If there is a gap, in all likelihood, the first print will not be the NYSE opening print. If you have a source which only has NYSE trades/ticks, PLS Let me know! I have spend a lot of time investigating that issue and have not come up with a solution (except subscribing to the NYSE TAQ database - which would be very expensive) Regarding intraday upgrades/downgrades: which source do you use ? I have checked DJ Newswires, FirstCall and Briefing.com. None of these sources are consistently the first to report the up/downgrade. Do you know of any better sources to check for intrady rating changes ? Oliver
I have not found away around that problem (getting data which has the NYSE open). It is something that has frustrated our guys as well. Very often the NYSE.com list the incorrect opening price as well. WSSource allows you to setup a window or an alert that is only for intraday upgrades and downgrades (i.e. intraday analysts action....coverage initiation (sp?) for example). only. You can set it up so that its right over your level II montage if you wanted to play those and not look at the rest of the noise, I mean "news" on the wires. Avalanche
TAQ data includes all exchanges....although you can break it out. I use bridge for historical data and I am 100% positive that they only use NYSE data for all of their historical data on listed stocks.