How to Adapt to the Holiday Volatility in 2020

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Today we’re going to talk about some of the tickers I traded this week. I also experienced some strange action in the market. I selected 4 tickers that we are going to talk about and some of the common factors they share. We’re going to figure out our potential edge and how to really react without taking multiple losses in a row.

Out of the 4 tickers I’m going to talk about now, some of the easiest factors to recognize is during the morning.

That way you can prevent the mistakes from happening, especially in the first 30 minutes the market opens. Lets look at $PPSI, $LIZI,$EVK, and $HGSH. All of those 4 tickers traded more than 10 million shares in the pre-market, some of them traded over 20 million shares in the pre-market. We talked about the volume estimation before. We are using the Pre-Market Volume x 10 to estimate the entire day volume. This is how you predict and see if the stock is going to be crowded or not during the day.

$EVK

Let’s start with $EVK, this is an after-hours gapper. It went from $2-$7. It opened around $6.00.

Let’s take a look at the yearly chart. We have resistance close to 120 million Volume resistance, around $6.00. If you look at the intraday chart there is no consolidation, just a parabolic move up. When you can’t find consolidation for you to manage your risk off of, it’s going to be dangerous. In this case, I did not get shares to short. If I did get shares to short, I probably would have taken a decent loss on this one. 100 million volume resistance is a decent amount. What I noticed is in these crowded tickers, after the morning squeeze, they don’t usually drop the average percentage that I expect them to.

In this case $EVK only dropped 50%, but you see that normal gap up short drops over 75% or lower than that. When you are looking at the chart, the stock didn’t really fade the ideal point that you would have expected it to be a potential short. In $EVK I was looking for a push into $6-$6.5 to get short into. We didn’t see the push in the morning, so I let that one go. This is the only sample out of hundreds, that produced a squeeze like that. This was a strange morning spike. Managing risk on this you wouldn’t want to be in if it breaks above the resistance near your entry.

$LIZI

The next ticker I am looking at is $LIZI, this one traded over 20 million shares in the pre-market.

I noticed that in the premarket and shorted it around $4.70. I broke my rules because I tend to avoid these types of crowded tickers that are trading 200 million shares a day. If you look at $LIZI it also has another 100 million resistance, similar to $EVK, but its more crowded compared to $EVK. We can see all the tickers trading over 10-20 million shares are producing some type of unpredictable squeeze during consolidation. In $EVK, $LIZI we see them both squeeze, people were forced to buy the breakout then it dumped afterwards. That was a long trap. (12/4/20)

$PPSI

Now look at $HGSH and $PPSI, these also traded a ton of volume pre-market and had a squeeze after the open.

In $PPSI we see nearly 300 million resistance, but it still squeezes multiple times during the day. Looking at these 4 tickers, the conclusion is that when you are trying to short into heavy resistance, if the stock is very crowded, wait until after 10:30am. It’s not ideal to short on the open, even if you are close to the resistance. The second factor shared, was in 3 out of 4 of these tickers, they faded in the afternoon and into the next day ($LIZI, $PPSI).

FINAL THOUGHTS

$PPSI dumped 75% from the high. $LIZI, $EVK, the majority of these gainers drop 75% from the high. The high is $8.30 and we would be looking for a drop to $3.50.

This is how you can figure out if the stock has potential to short into the next day. In this case, $EVK, $LIZI has potential into the next day but $HGSH and $PPSI do not. This is how you can figure out if there is a decent amount of reward going into the next day. If you look at the chart action you can see they share multiple factors. Keep in mind how you size in and at what time, you want to wait at least 20-30 minutes after the open. These were some of the details I figured out trying to adapt to the market. For me, it wasn’t a great week.

I should have caught some of these opportunities but was rushed into my entry and took some losses and made some small gains. Hopefully, I will be ready next week. No matter how many years you’ve been in the market you’re always trying to adapt.

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