How to Find the Correct Entry on Micro-Float Stocks (Dux’s Runner Analysis)

How to Find the Correct Entry on Micro-Float Stocks (Dux’s Runner Analysis)

How to Find the Correct Entry on Micro-Float Stocks (Dux’s Runner Analysis) 480 360 Steven Dux

Today’s topic will be ABIO and DFFN. This is the first low float that we’ve experienced in the past two months. We’re going to talk about how to trade it and some details you should be careful with, including whether the stock has an age or not. Let’s get into it.

Why ABIO is Risky

ABIO is a super low float. As you can see, it’s under $1 million. Any floats that are under 1 million are considered a micro float. Here are two things you should know about micro floats:

  1. They have really high volatility.
  2. It’s really hard to get an accurate entry point because the spread is typically very high, and the range is pretty big.

We’re going to see that on the first day, the range was 5-20. Most people think, “ok, well the stock went out over 100%, it’s time to short”. I know from experience (because I track statistics on those micro floats) when it’s the right time to short and when it’s time to cover. Micro float stock is likely to spike over 100%. If a micro float spikes just over 100% – even barely over 100% – that’s considered to be low because average micro float tends to spike over on the first or second green day. On the first green day, if the trade is about 15 or 20 times per rotation, it typically goes over 200 or 300% if you trade about 2 million shares. That spike in percentage is actually considered really low for micro float stocks.

How to Find the Correct Micro-Float

People are eager to reduce size in those plays, because for the last month, we didn’t really have any place to size into. When people are that eager to make a play, that means they are eager to make money. When you start thinking like that, you’re likely to lose because you’re driven by emotion.

In this specific situation, people who shorted on May 1st got squeezed into premarket and bought the break as well. It is much better to short on this day (the second green day) than it is to short on the first green day. You might be able to trade in micro float on the second green day, but never on the first. For the second green day, it needs to form its resistance.

In this entry, in the morning, it’s a complete gamble because you don’t know if the size is going to spike higher. Typically, on the second green day gap up, it’s hard for a set to go red since it gapped up 80%. For ABIO to go red, it needs to drop lower than 50 on this current day, which is unlikely to happen.

As you can see, it dropped from 20 to 12 but it’s still 20% up in green. That’s why I didn’t short on the gap up into the second green day. This took me to a perfect gap down since it needs to start to go red first, push through the resistance, and then short into that. I typically don’t short in on the second green day gap up. It was right around 7:00 am when I woke up and there were shares to short. However, no matter what you do, there is no edge to break through the resistance; it’s pretty much a gamble to short into the second green day. Now, if the stock gaps down and is just over 100%, you may decide to use the $13.00 as resistance to short in. If you do this, you might not reach the $13.00 because the consolidation area is between $9.00 and $13.00. Because of this, you won’t know where to choose the resistance shorting.

And That’s the Risk…

As you can see, that is the risk for shorting into micro float since they have a large range of risk area. The key point is to always find consolidation after the first green day to short into micro float stocks. Once it consolidates, you have a tighter range, especially on the second green day. This means that you won’t have resistance around 8-12 or 8-13, where you don’t know if the risk is at eight, nine, ten, or eleven. That is the risk of micro float.

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