The special situations investor has sensed an opportunity. In the video below, we cover a recent trade that cleared a decent return by combining a special situation trading event with technicals. The catalyst was created by the special situation.
This strategy is a framework many hedge funds will deploy.
A special situation is an unusual event that compels investors to buy a stock or other asset in the belief that its price will rise.
The special situation by definition has little to do with the underlying fundamentals of the stock or any other rationale that investors ordinarily use to select investments. It is an attempt to profit from a potential rise in valuation that the special situation presents.
It can be an attempt to profit from the anticipated recovery of a stock whose price has been depressed by a special situation. It’s the classic “buy low, sell high” advice. In the example video we discuss.