Finding non-buyout candidate for shorting...

[Bugsy]

Probably a dumb question, but I have a particular company I buy and sell short on currently. Though I've recently read in several places it, listed with other companies, could be potential buyout candidates because of how well they run their company (I trade within the oil industry market).

Obviously this is worrying to me when it comes to the short side of the argument, especially right now it being in correction mode. My question is, what factors or methodology could I use to find another company that would definitely not be a fear as a buyout candidate for periods of shorting?

Since I trade based on technical analysis and don't invest I'm a bit ignorant in this department, but know it is one I need to figure out rather quickly. Thank you in advance for any help.

 

[d08]

If you knew something like that with a degree of certainty, wouldn't you be able to just sell far OTM calls?

 

[tomorton]

Buy-outs in a sector tend to come in series. As long as yours isn't the first in line you might get some early warning as larger players in the sector start re-positioning and reacting to what competitors are doing.

Even if larger players in the sector start accumulating cash not dedicated to dividends etc. this could be a warning signal. As could re-shuffles of top board posts: some CEO's etc. have track records in consolidation, so keep an eye on movements. Especially if e.g. a top manager from your company moves to a much larger player in the same sector.

People say share dealings by the company's directors can give a clue. There is only one reason to buy shares, and that's because they are expected to rise in value, and a director, the theory states, should know better than anyone.

 

[Bugsy]

Buy-outs in a sector tend to come in series. As long as yours isn't the first in line you might get some early warning as larger players in the sector start re-positioning and reacting to what competitors are doing.

Even if larger players in the sector start accumulating cash not dedicated to dividends etc. this could be a warning signal. As could re-shuffles of top board posts: some CEO's etc. have track records in consolidation, so keep an eye on movements. Especially if e.g. a top manager from your company moves to a much larger player in the same sector.

People say share dealings by the company's directors can give a clue. There is only one reason to buy shares, and that's because they are expected to rise in value, and a director, the theory states, should know better than anyone.

Wow, that's very savvy thank you. Probably more than I am capable of as a technician. I started brainstorming and began searching oil ETF's to see which might come close to the specific stocks I follow. After a bit of digging I did manage to find 2 different ETF's that closely mirror the stocks I follow. I may lose a little bit of profit between the difference in my stocks and the ETF's, but what I lose I will make up for in peace of mind should the stocks I follow be bought out while I'm shorting the ETF. Much appreciation, and if anything, your analysis will surely be utilized by other lurkers and members!

 

[tomorton]

No problem Bugsy.

Your concern highlights one of the issues when trading stocks - each one on its own is much more liable to surprises than an index in which its one of 30 or 100 or 500. One reason why stock traders often specialise in a sector (like you have) - there's a lot of nuance to keep track of.

 

[Metamega]

Have you considered trading oil futures, an oil ETF or some sort of ETF of oil companies?

Be diversified enough to avoid a single buyout.

I’ve never crunched the numbers but commodity stocks usually follow the underlying of what they mine. Their are leaders and laggards especially depending on their diversity but I’ve always noticed they follow their underlying commodity pretty close.

 

[Bugsy]

Have you considered trading oil futures, an oil ETF or some sort of ETF of oil companies?

Be diversified enough to avoid a single buyout.

I’ve never crunched the numbers but commodity stocks usually follow the underlying of what they mine. Their are leaders and laggards especially depending on their diversity but I’ve always noticed they follow their underlying commodity pretty close.

Ya that's what Tomorton and I were just touching on. That's my plan I have decided to use for shorting and earnings reports. For the long trades I plan to use 1-2 well managed and 1+ mill volume traded small cap oil companies I keep up with. And you are correct, I found 2 specific ETFs that closely mirror my chosen choices.

I tend to follow the actual CL WTI Futures markets first and foremost to make my moves, and I swing trade usually several days or longer at a time. Having traded on the CME futures market in oil derivatives before, I got my ass handed to me day trading on very short time scales couple years back for about $15 grand. Hurt but I learned some very valuable lessons and experiences from it and have done far better now because of it. Some things you just need to lose your ass in b4 you can excel in it. Thanks!