Strategy Description: The prior day closing price on $FORD was around 60c so only a very small change was required to induce a volatility halt. Couple this with a small float, a thin stock and fresh news and you're going to get a lot of volatility halts. This play is identical to shorting other day 1 moves except that the volatility halts made it a little more complicated, more nerve racking, and required a little more execution skill.
A common pattern when a stock is going through multiple volatility halts is for it to move big in a direction, halt, gap in that direction, move in that direction, halt, gap in that direction ec etc. Then the moment it stops gapping in the one direction (i.e. momentum breaks) it will start going the other way (I think because the halts have created an overshoot), then it likely repeats the same pattern in the other direction.
To refresh shorting float rotation stocks on day 1. Requirements are:
- Not actually that low float.
- Massive move.
- Early morning failure, and subsequent move below vwap.
- Don't fight it once the day is moving on and it is holding trend.
--- So FORD fulfilled all but 1 of these. Once below vwap the usual strategy is to hold at least half until near the day end. I actually misplayed this in that I only played it for the move back to vwap and accordingly missed a big portion of the move.
Looking at the intraday pattern of FORD it is pretty clear that it did the volatility halt pattern extremely clearly. The psychology behind the move became more clear to me as I thought about it more... Unfortunately this meant that I was a bit slow to get short and missed shorting in that 1-3 minute window near the top once the momentum was breaking.
It was a bit far from vwap, but combining the understanding of the volatility overshoot (creating the overhead supply) it seemed very viable as a situation to short day 1. Of course hindsight I should have played it as I would on other ones (that is hold half until eod).
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