samtron said:
Cheers Nas,
I also try implement a similiar rationale to the one that you excently decribed above; but I have found that gappers can distort the picture, (ie a stock gaps up say 7%
but then sells off slowly, will allways appear near the top of the %change column ), have you found and easy way to cater for these?
PS made a profit on my overnight BRCM trade (more luck than judgement
) the stock was very active in the post market the evening I bought).
LOL Samtron,
Congrates on your BRCM trade, very glad it was profitable (luck was with you). BRCM was all over the place in AH on the 19th, and calmed down the next morning.
The “Change Open %” in post # 599, was for stocks “after the Market Opens.” But are not intended for gapper stocks, since they have made their 1st moves during pre-market (PM). I do add them to the Change Open % watch list, to see how they behave after PM.
But I do give special interest to Gappers, which appear in my Gap Down or Gap Up scanner prior to market Open. In case your platform doesn’t have a scanner like mine, then use the one provided by:
· NASADQ Link:
http://dynamic.nasdaq.com/dynamic/premarketma.stm
· There is another link called a heat map of the NDX – 100, and gives a false sense of gapers, which most are not.
http://screening.nasdaq.com/heatmaps/heatmap_pmi.asp
· Another source is CNBC’s (from my TV Cable service, which has a ticker shown on the bottom of the screen (not sure if it’s the same or even available in EU). I don’t use this either, only my scanner.
I have had success trading gapper stocks. But, I do not trade Pre-Market (PM), its to risky, insufficient volume, and lack any history, with news. But I am only interested in stocks, which have “Blow Out Earnings.” Not stocks, which just met their earnings estimates, these are already priced in so I don’t pay attention to these. There is a lot of risk with trading these stocks, the earnings news is not all relevant, and many have devious strategies to line their pockets with our money. Therefore, I keep an eye on the price action of a strong EPS stock during PM, then put it on a PM chart and only trade the stock if it breaks out in the direction of the PM trend (I don’t like bottom fishing nor a pull back). In other words, I use triggers, which I set above or below their trading range during PM. Blow Out Earnings stocks “usually” go up, but not always, that’s where the triggers come in. If these stocks don’t have great momentum, and a narrow spread, then I stay away. I try to have these stocks show me that they have the momentum to push through my triggers, but they do pull back, & I haven’t been able to tell which stocks will. These stocks usually ignore the market trend, O/B or O/S conditions.
I stay away from “stocks being bought out”, and stocks with light trading volume like 12K, and cheap stocks below $20. Also, trading stocks with large PM price movements (Gappers) are very, very risky. I would recommend paper trading them, and take notes on their vol, gap % change, etc. during PM. Then set triggers outside of the PM range, and see what happens. The best stocks have a lot of momentum, and are reasonably well known stocks. Usually the high vol stocks that we don’t trade, like INTC, MSFT, CISCO, etc, are “not good candidates” (they’re fool's gold). Last thing, for gappers, stocks with >= 3 % Gap Open are proper candidates. GOOG for example, always gaps up/dwn on most PM’s but didn’t pass 3% gap req’mnt. But has had blow out earnings since its been in the market ( 4 times/yr).. On Friday’s market open, GOOG established a PM range between 460.0/Hi, and a 456.5/Lo. I set triggers over the PM range being 460.5 as trigger for a Long – which wasn’t hit, instead it hit my Short Trigger of 456.9, which I didn’t follow, since my rule is to go with the EPS trend from AH into PM as being a LONG. I don’t like trading stocks above $80, so I was willing to trade 100 shs due to the risk, it had an ATR(1) = 1.55 during martket open on Friday. I’ve had a tendency lately to not short gappers, therefore missed the SNDK short trigger from 51.9 for about a 200c move.
Just a note, Gap stock trading dangerous, & especially for those without a lot of experience.
Nas
