SGH - Slater and Gordon

[skyQuake]

They've moved 90% down and 100% up from the bottom... and keep monitoring is your plan?

You could pair trade them... but you shouldn't. Except for the fact that they both fell a lot around the same time, there is no premise for a pair trade.

The good old long-both-sides strategy!

 

[Gringotts Bank]

They've moved 90% down and 100% up from the bottom... and keep monitoring is your plan?

You could pair trade them... but you shouldn't. Except for the fact that they both fell a lot around the same time, there is no premise for a pair trade.

Watching with interest more so than monitoring.

I think there is a premise, but not one which is well known perhaps. When there's a lot of attention on a particular stock, other charts of stocks in a similar situation can start to mirror them. Or maybe they mirror each other.

key words - emergent systems, coherence, mirroring I haven't cracked the code, just saying there's something there.

 

[CanOz]

Watching with interest more so than monitoring.

I think there is a premise, but not one which is well known perhaps. When there's a lot of attention on a particular stock or sector, stock charts start to mirror one another.

key words - emergent systems, coherence, mirroring

Isn't a pair trade usually to take advantage of a divergence, so a usual correlation that has diverged, the bet being it will converge?

 

[Gringotts Bank]

Isn't a pair trade usually to take advantage of a divergence, so a usual correlation that has diverged, the bet being it will converge?

afaik, yeh.

So right now, with DSH running ahead of SGH by 10%, you'd short DSH and long SGH.

 

[Gringotts Bank]

Another example would be RMS popping up like that on good news.

Other gold stocks with a similar chart pattern and starting with 'R' suddenly come into the spotlight and should benefit. RSG for example. I bet it follows up.

 

[McLovin]

afaik, yeh.

So right now, with DSH running ahead of SGH by 10%, you'd short DSH and long SGH.

Why? They're completely different stocks.

 

[Gringotts Bank]

Why? They're completely different stocks.

Yeh but similar in enough ways that people will start to think they should behave the same way.

Both have:

- big drop/shock news
- similar chart pattern
- household names

Obviously fundamentals will rule in the longer term, but I'm seeing mirroring.

 

[CanOz]

SKC and Co., are the pairs trading gurus and i'd reckon they'd only look for similar industries, like Pepsi and Coke, GM and Ford, etc...

 

[Gringotts Bank]

SKC and Co., are the pairs trading gurus and i'd reckon they'd only look for similar industries, like Pepsi and Coke, GM and Ford, etc...

Yeh of course. That's how pair trading is done!

I'm talking about my observations. I'm throwing up something novel for discussion.

I would never question a guru. That would be...just...unthinkable.

 

[McLovin]

Yeh but similar in enough ways that people will start to think they should behave the same way.

Both have:

- big drop/shock news
- similar chart pattern
- household names

Obviously fundamentals will rule in the longer term, but I'm seeing mirroring.

Hmmm...Sounds pretty far fetched to me. Good luck with it.

 

[VSntchr]

SKC and Co., are the pairs trading gurus and i'd reckon they'd only look for similar industries, like Pepsi and Coke, GM and Ford, etc...

Yes.
And the reason why is to reduce industry and market specific risk. In the example above, any announcement on changing regulations within the legal field will have zero impact on DSH but will obviously affect SGH.

If your going to pair-trade SGH then maybe look at SHJ. Again, there is differences here as SHJ doesn't have UK exposure - but its a heck of a lot closer than DSH.


I see what your suggesting GB, I just don't think it's a strong enough premise to allow someone to have conviction to take proper size in a pairs trade - there's too much risk at stake.

Just IMO of course and I'd be happily proved wrong through some running examples.


On another note, taking a read-through approach to trading SHJ on the SGH jump worked well- with the price recovering from ~180 to 200. Whereas in the case of DSH, a short on JBH was the read through..which has also worked well with price falling from ~1920 down to 1800 (despite a roaring market).

 

[skc]

I think there is a premise, but not one which is well known perhaps. When there's a lot of attention on a particular stock, other charts of stocks in a similar situation can start to mirror them. Or maybe they mirror each other.

May be (probably not). Let's see if you can come up with a way to back test this theory.

FWIW I think you are drawing the wrong lesson here. You could certainly learn from the price behaviour of one stock and try to project that to another stock (i.e. the mirroring). But to pair them up would be the wrong way to make use of that knowledge.

Another example would be RMS popping up like that on good news.

Other gold stocks with a similar chart pattern and starting with 'R' suddenly come into the spotlight and should benefit. RSG for example. I bet it follows up.

You can certainly develop trading ideas from historical correlations... but company specific news tend to override them. Look for industry-specific news - where you can get all sorts of readthru, read-across etc. A good example would be PRY coming out with a profit warning and you look for weakness in SHL. A bad example would be buying RSG because RMS found some gold. Unless there is a revenue sharing agreement between all gold stocks starting with "R"?

 

[skc]

On another note, taking a read-through approach to trading SHJ on the SGH jump worked well- with the price recovering from ~180 to 200. Whereas in the case of DSH, a short on JBH was the read through..which has also worked well with price falling from ~1920 down to 1800 (despite a roaring market).

Much better examples than mine.

 

[skyQuake]

Interesting concept. I'd say the correlation right now is due to the same type of traders punting around. When you have slaters rolling over, the same traders are probably already liquidating DSH positions.

Once the activity dies off they'll go off on their separate paths again

 

[skyQuake]

Holyyy ****, did anyone else frontrun that big dumb buy order into the close?

1000bp slippage

 

[notting]

Holyyy ****, did anyone else frontrun that big dumb buy order into the close?
1000bp slippage

Do you want to spell out what your saying on this one and thinking on that?

 

[CanOz]

Do you want to spell out what your saying on this one and thinking on that?

He was asking if anyone got in before a large order paid to much for too long....

 

[Stratagist]

Well there was a lot of playing around with SGH last few days
Pre close orders were 1000 plus on a couple of days yet post close dropped to 800 - odd
And someone was playing with the market as there was a 100000 order in the market on a couple of days yet pulled before close of trade
Being a short term trader have been following the PSAR and SMA using candle stick charts on both five day and one day charts The stocks I choose are on my watch list based on good volume and mostly chosen with a weekly scan with charting software. I prefer to use stocks under $5.00 staying away from the mining stocks as at this stage it is a dangerous market
Punch up SGH in your charts and use the candle stick chart which gives an indication of high/low support and add the SMA(simple moving average) and PSAR(parabolic SAR)
I actually entered too early at $0.98 then again at $0.85 to average down. I should have waited until the PSAR was in an upward trend then could have entered again at around the $0.70 mark - but that is the learning curve
Monday confirmed this upward trend as the candle stick chart was trading above the SMA and the PSAR still trending upward
I rode the upward trend paying attention to the 1 day and 5 day charts until the Candle stick crossed below the SMA and the PSAR began a downward trend about 1pm today - I pulled at $1.40 and made a healthy profit
I have used this principal with a number of stocks and pulled three figure profits but SGH would be one of my bigger trades pulling four figures. I will buy SGH again if the charts indicate a trade
Some of my trades only turn a small profit and yes I have made small mistakes but if you do not make mistakes you will not learn the art of trading short term. I started with a cash reserve of $50000 which has generated a healthy income
This trading option may not suit you but do a few paper trades using the candle stick charts, SMA and PSAR indicators - see how you go

 

[Gringotts Bank]

CDD, SPO...

It continues.

 

[VSntchr]

Guidance update: No longer expecting to achieve guidance based on a worse H1 outlook. H1 was already bad before...!