Strategy Description: Particular interesting statistics/facts of this low float:
- Recent IPO.
- Trades extremely thin (like a low float) but mixed float numbers out there. One has 30m, another has 4m.
- Very easy to borrow all day!
- In addition to the mornings new it had significant upgrades throughout the day; aka continuous positive news flow (in the form of upgrades) contributing to a great trend. At the time I didn't really consider this significant, but it is also significant.
There's a couple of important nuances to a significant gap up compared to a small gap up type of thing. A significant gap up is relatively unlikely to be a gap and go; instead a consolidation is required to ensure that profit takers etc aren't going to drive it down. Thus shorting any opening pops (against say the premarket high) is actually a very viable strategy. If the gap is still holding post 10am and volume hasn't really dropped over and it is above vwap (and holds above) then we have business!
One particular possible early tell, and a time to begin accumulating a position on dips is a "reclaim" this is when it drops the low/support but immediately reclaims and doesn't go back below. This is not a good place to put stop-loss if have already started in! This is also why you need to start in small because you need to have a wide enough stop-loss to allow for this.
From here, provided it holds trend you want to add on dips. When it makes a new high is the high probability entry; however, remember that you don't even have to go full size here (if missed earlier entries and don't want to enter all at once). We expect a float rotation stock to close somewhere near the highs. Therefore; there is no harm in adding to the position on the way up and getting full size quite a wee way above the breakout.
Position management:
- It is essential to hold about 1/3 of the position literally as long as possible! (i.e basically plan to hold until the end of the day). The stock going parabolic is not a reason to sell here (unlike normal trading).
- The remaining 2/3s of position should be scaled out very evenly. There is a lot of games played on the extremely low time-frames on these stocks. By scaling out even (e.g. 100 shares every 20c) you ensure that it's difficult to be gamed, and you ensure that you have always sold some into strength, putting you in position of reloading on a dip and/or consolidation.
Notes:
- It's day 1. Don't even bother shorting! Once the float rotation upward momentum is confirmed (i.e. I'm not talking about the morning) there is no point shorting until tomorrow. I made that mistake with this one. I actually nailed the highest volume bar on the m2... But that wasn't a good enough parabolic, in fact it barely pulled back from there.
- As the price action starts to speed up and the range gets bigger there is an enormous edge in providing liquidity (say compared to the morning when the price action was a lot tighter).
- It's day 1. Buying washouts (aka new relative lows) has an edge as everyone is trying to cover their shorts. Use these spots to get excellent (small) entries/re-entries.
Daily:
Chart for the Morning:
Chart for the Day:
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