A working thesis by some traders on the desk today was to watch the pot names and try and catch Sympathy Plays.

From one of our traders to his Team last night jumpstarting idea generation:

The pot stocks were moving. This is a theme Curt and I have been monitoring since CGC came out with earnings. CGC has been the leader, but TLRY and CRON have been moving in sympathy. This has been a good opportunity to get better at thematic sympathy plays. This is the third day I’ve seen instances where CGC makes a move and the others follow. This can really help gain edge in a setup.

The idea with Sympathy Plays is to determine the leader in the sector, watch it make a large move, and then enter the sympathy stocks before they have moved like the leader.

For example, when CGC tanked on the open today, you might short CRON as it had not gone down yet.  Also, you do want to factor in how much both were up for the day, how much they have traded up of late, whether there was independent news in a name, short interest, RVOL, and the tape.

This is a particularly strong strategy in a new sector.  It can be easier to trade Sympathy Plays than directionally in the leader like CGC.  The leader may be too volatile.  Focusing on Sympathy Plays can help you add risk in such hot names, and also enter trades that do not move too fast.

The consensus on the desk was that Sympathy Plays worked right on the open, but did not, mostly, throughout the day.  For example, you might notice that CVSI was the strongest in these names today, holding above VWAP, and finishing near highs.  Be openminded with a working thesis of names trading in concert to anomalies and/or days when they trade individually.  However, overall this can be a very powerful strategy to add to your PlayBook.

*no relevant positions