Strategy Description: On the open I'm always looking to fade pops and washouts until direction is determined. In this case I was scared off shorting ADBE at (what turned out to be) an incredible price because it had an opening buy imbalance.
The situation was:
(1) Daily short term uptrend.
(2) Good news.
(3) Relatively big gap (hence looking to short on over-extension).
(4) Uptrend throughout after-hours and into premarket. Not a super strong uptrend, but reasonable enough.
(5) Decent buy imbalance, hence the big 9:28am pop.
These are reasons to be somewhat concerned about the magnitude of a potential pop on the open. It can lead to an opening uptrend. The appropriate adjustment is to adjust expectations for a decent opening pop and position accordingly. However, when that uptick from the premarket fails quickly on the open it can be a blow-off top, and it is reasonable to adjust expectations back to normal.
The key is not to chase it lower, but to set good risk-reward trades with risk based off the high. Not ethat may be beneficial to use a hard stop here.
In this case it rallied back to $98.00 from a high of $98.30 in the premarket, which is incredibly good risk-reward.
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