Sympathetic Trade: Where there's smoke, there's fire !Where one stock in an industry goes up its competitor or similar companies in other markets might also go up. This can be described as a phenomenon of "sympathetic trading" or "sympathy moves" . In the stock market, a sympathy move is when the stock price of one company moves in tandem with the stock price of another company in the same industry. This happens because market participants assume that what affects one company will likely impact others in the same sector.
For example, if a tech company reports strong earnings, other companies in the same sector may also see their stock prices rise due to the assumption that they may be experiencing similar success. This doesn't always hold true, but it's a common occurrence in the stock market.
Note that such co-movements can also occur due to shared exposure to macroeconomic events or broader market sentiment rather than industry-specific news. It's a common theme of the interconnectedness of financial markets.
In this case online used car seller Carvana stocks jumped close to 60% , a MASSIVE move on the NYSE today on good news of the second hand car market recovering reflected in their sales and forecast for the rest of the year. Carsales.com(.au) a major used car seller website in Australia and other markets might also experience a similar upturn in demand.
Carvana.com and Carsales.com, both being in the automotive e-commerce industry, have similar business models and might be subject to the same macroeconomic factors, industry trends, and customer behaviors. If Carvana.com sees a substantial increase in its stock price, it could indicate positive developments or favorable conditions within the online car sales industry as a whole.
Thus, traders might speculate that Carsales.com could also benefit from these positive developments or conditions, and this could lead to a rise in its stock price. However, it's important to remember that while this logic can sometimes hold true, it is not guaranteed. Each company's financial health, management, and specific circumstances also play a huge role in determining its stock price.
It's also worth noting that the stock markets in different countries (in this case, the US and Australia) might not react in the same way to the same news. Factors such as time zone differences, local economic conditions, and regulatory environments can influence how similar stocks perform in different countries.
Sympathy trades across different markets can sometimes give you a good early indication of industries and stocks that might be about to turn around.
Carsales in this case does look like it could be at a good support area so could be good timing for an entry if you do your due diligence and decide it might be a good trade.
Be interesting to see how it plays out.
