Quant Trading Seen Playing Significant Roll in Shipper Rally - Wells Fargo (DRYS) (DCIX) (GLBS)

November 16, 2016 12:42 PM EST
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Price: $4.60 -3.97%

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Wells Fargo shipping analyst Michael Webber provided an addendum to his earlier note on the wild activity seen in the sector over the past 5 days.

He said while they believe retail momentum and short covering likely got this trade going, given the sheer size of the volume and the continued (relentless) pricing movements " we believe momentum based algorithms (quant trading) are likely a very significant factor/catalyst at this point."

"We believe this is important to note, given that if these moves were purely a retail momentum trade, the incremental value created could have relatively more staying power than a more quant driven flash (esque) bubble," he said.

"Again, we think this micro-cap outperformance started with a thematic, risk-on Trump rotation, followed by retail momentum and (multiple) short squeezes, with an ever increasing push from quant driven momentum. While we believe these pricing movements are still too severe get in front of on the short side (at least for us), we do think there will be a material flip side to this trade. Ultimately, we think they’ll give a lot of this back...but probably not all of it, as longer-term prospects have likely improved to at least some degree."

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