Market action is dominated by 8 to 20% moves on 3 to 5 days timeframe. These are momentum burst or impulse kind moves where in a very short period of time stocks make a explosive move of few days. This same phenomenon also works on IPO.
To find opportunities like BOOT , I look for an IPO having a range expansion. The range expansion scan gives stocks that had bigger move than last few days of move. Along with range expansion I like to see a volume surge.
In ideal situation stock should close near high on breakout day. A stock that breaks out and say makes 1 dollar move on breakout day but intraday gave 50 cents of that move, is not something that I like to enter. If it pulls back say 25 cents after making high it is acceptable.
As you can see in BOOT prior to breakout day it was a negative day with stock down -.17%. I like to select stocks that had negative day prior to breakout day or a stock that is up less than 1%. I also avoid stocks that are up 3 days in a row prior to breakout. This ensures that the entry is at start of a swing move.
These kind of trades are typically of 8 to 40% magnitude and that move happens in 3 to 5 days time. To exit them I look for a price target of around 8 to 12%. If it is low priced stock then it can make even 20 to 40% move in 3 to 5 days as they tend to be more explosive. As far as possible I exit in t0 strength.
As we are entering the start of a momentum burst a tight stop can be used on these trades . If the trade violates the breakout day low the momentum is over and it is not worth holding it . So stop goes in at low of the entry day.
The market offers hundreds of such trading opportunities. Not every trade works like a charm like BOOT, but as long as half of them work and we keep losses small on one that do not work, it is ok. H
To find such trade daily on IPO you need to track IPO with less than one year trading history. Once you have that watchlist you can use a range expansion scan to find opportunities. If you set this up you can regularly generate your own trade candidates on your own.
To find such trade daily on IPO you need to track IPO with less than one year trading history. Once you have that watchlist you can use a range expansion scan to find opportunities. If you set this up you can regularly generate your own trade candidates on your own.
No comments:
Post a Comment