Is There A Trading Pattern Emerging In France Telecom?

| About: Orange (ORAN)

Concerns about the European economy may have created a short term daytrading opportunity in shares of France Telecom S.A. (FTE).

I noticed that the stock seem to sell off overnight, depending on the news in Europe, and then, particularly after the European exchanges close, the stock recovers during American trading.

Since December 22, 2011, if you bought FTE at the U.S. open and sold it at the closing price, you would have been better off than just holding the stock over that period.

FTE has been up intraday on 68% of the days during this period. More importantly, if you had bought at the open and sold at the close, the total profit would have netted to $1.21, or around 8% of the average price. Buying and holding of the stock would have resulted in a loss of 35 cents over the same period.

Patterns over the long term

It's a pretty short period, and the question would be whether this kind of pattern holds up over the long term, and whether it can be used to make money going forward. I ran the numbers of the last three-years and the stock went up intraday almost exactly 50% of the days; the stock gained about half the time, meaning there was no valuable pattern as far as daily ups and downs were concerned.

But it's a different story if you look at the amount of the net gains. During that time, the stock gained $9.90 during US trading even though the stock dropped by more than $20 in total (although half of that can be attributed to dividend payments.) The intraday positive moves much more than outweighted the overnight losses.

This was during a very volatile period for European stocks, but the investor can make their own decision on whether things have changed all that much.

Commissions can be a problem when daytrading in this fashion. Even if the trade is successful over the long term, a trader would need to take fairly large positions to overcome the costs of going in and out each day.

Traders should look at the patterns to determine if they can get ahead of the market when it comes to daily movements of stock prices, and there may be opportunity in FTE for those with the ability to commit enough capital.

I also looked at another European Telecom, Telefonica SA (NYSE:TEF), and didn't identify as nearly as clear a pattern. As always, please do your own due diligence.

Disclosure: I am currently short FTE, looking at the long term prospect of a European recession and its impact on stock prices.