Four Winning Trades Based on Analyst Calls
Reports from research analysts can frequently move stocks. A particularly bold upgrade or downgrade can send a stock rallying or plummeting. However, even slight ratings adjustments can have effects. Traders may wish to stay alert of these ratings changes, as they could serve as the basis for building a winning trading strategy.
On Friday, Benzinga Professional covered 22 stocks receiving new bullish or bearish ratings from research analysts. Nineteen of these stock were initiated with, or upgraded to, a bullish rating (Buy, Overweight or Outperform). The other three stocks were initiated with, or were downgraded to, a bearish rating (Sell, Underweight or Underperform).
All 22 stocks started today's session moving in-line with the new ratings in question. Below are four of the largest moves:
Bank of America on Research In Motion
At 6:20 AM, Benzinga Professional reported that Bank of America had downgraded Research in Motion (NASDAQ: RIMM) from Neutral to Underperform and reduced its price target from $13.50 to $6. Shares opened at $7.78 and fell to $7.34 at 11:10 AM--a decline of 5.66 percent.
ThinkEquity on Medivation
At 6:47 AM this morning, Benzinga Professional reported that ThinkEquity had initiated its coverage on Medivation (NASDAQ: MDVN) with a Buy rating. Medivation shares opened at $87.65 and reached an intraday high of $91.75 at 10:57 AM--a gain of 4.68 percent.
Janney Capital Markets on Multimedia Games Holding Company
Benzinga Professional reported that Janey Capital Markets initiated its coverage on Multimedia Games Holding Company (NASDAQ: MGAM) with a Buy rating at 6:47 AM. Shares began today's session at $13.42, later peaking at $13.99 around 12:20 PM for a gain of 4.25 percent.
ThinkEquity on Synageva BioPharma
At 6:47 AM, Benzinga Professional reported that ThinkEquity had initiated its coverage on Synageva BioPharma (NASDAQ: GEVA) with a Buy rating. Shares opened at $40.72 and reached an intraday high of $42.38--gaining 4.08 percent by 9:52 AM.
The Rest of the Ratings
The rest of the 22 stocks also moved in-line with their new ratings today, at least for part of the day. Currently, 70 percent of these stocks have moved in a direction concurrent with their recent ratings.
Trading the Ratings
Had a trader assumed long positions on bullish ratings and short positions on bearish ratings, that trader may have seen a portfolio gain on Friday.
If a trader placed orders based on these ratings at market open, the trader might have seen a gain totaling as much as 2.41 percent. This assumes that the trader covered their shorts at the lows of the day, and sold their longs at the highs of the day.
However, if that trader had covered their shorts at the highs and sold their longs at the low, that trader may have only lost as much as 1.42 percent.
Of course, performance would have varied depending on trader skill and the timing of entries and exits. Nevertheless, traders should keep analyst ratings in mind when formulating their strategies.
Latest Ratings for RIMM
|Jan 2013||Evercore Partners||Downgrades||Equal-weight||Underweight|
|Jan 2013||Credit Suisse||Downgrades||Neutral||Underperform|
|Jan 2013||RBC Capital||Maintains||Sector Perform|
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