We don't talk about "sympathy" plays as much as we should, but that's just an oversight, not because they aren't important. When it comes to earnings season, nothing much is as powerful as a good sympathy play. Let us give you an example.

On 7/19/05 we were holding SYMC long. Although they didn't have earnings until the 28th, we did see that Checkpoint had earnings due out that day. So, CHKP who is another tech company in the business of anti virus and online security came out and beat their estimates handily. Instantly, SYMC began jumping. They moved in "sympathy" with CHKP's earnings.

We base a lot of our moves around the idea of sympathy. We utilize the concept of sympathy so much on a daily basis that it's second nature and we often forget to suggest that it makes for a good play. When earnings are announced, the reporting company usually moves so quickly that it's impossible to get off a good trade. But it's very likely that if the company that reports did well, other "leaders" in that company's sector will move higher in sympathy, and you can usually get a trade off on one of them.

This is especially true if you can find a company that hasn't yet reported earnings. In other words, let's say the "XYZ" company reports today. They are in the software sector and they beat the estimates in a big way. So you see that the "ABC" company is in the same sector and they don't have earnings for 4 days. Getting into ABC on the heels of XYZ will often reward you with a gain, as they buy up ABC in hopes of similar results.

Sympathy also works in the reverse, and maybe even more so. If XYZ misses earnings, ABC will fall too. It might be worthwhile to consider adding a short position to ABC, as traders come up with the idea that if XYZ blew it, then surely ABC will too.

Market sympathy is a common phenom and one that we take for granted. But for the new members among us, it's good to remember that a lot of what takes place in the market is purely sympathetic to what leading companies have to say. When IBM releases their earnings and beats the estimates, a thousand stocks inch higher. Did a thousand stocks just beat the estimates? No, but it raised the hopes that they will, hence the sympathetic move. Keep that in mind for all your market trading and you'll quickly find yourself thinking around the lines of sympathy in all forms, such as earnings and even news releases.

If an insurance company warns about losses, others in the sector will fall. If a car maker announces pension troubles, others will fall too, because "surely" they have the same trouble. Sympathetic market movement is all around us, but sometimes we forget to categorize it as such. Just remember it happens and it's real. It will help your investing career.

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