This week's lesson.
Today I want to talk about the details behind the first green day, and we are going to use $SOLO and $SKYS as we go over consolidation breakout and layer support.
These factors are crucial for short-sellers and play a significant role in your buying or long strategies.
Let’s start with $SKYS and how the pre-market push showed us how unpredictable it could be.
There’s no volume to be seen in the pre-market, making it impossible to configure the intraday volume; however, we can see a late-day spike break the pre-market high and become the support. You’ll see many people favor shorting the spikes, especially ones that curve like $SKYS, but it can be difficult for the parabolic to come back down so let your patience step in and wait for the consolidations. Seeing a stock pullback, breakout, and consolidate all day is a typical pattern that lets you know it’s the first green day. You’ll see a crack, near $2.30, for instance, but the problem with that is the uncertainty of whether the stock will gap up or gap down. Now, if $SKYS obtains more volume, say 15 million on the second day, and breaks $1.50, then you’re in a position to go long instead of shorting.
With $SOLO, a ticker with a market cap of around 50 million, means for a slow breakdown.
$SOLO only shows volatility on the frontside morning spikes, and then we see the range have a tight bounce back and forth. If you’re looking to short on the first green day with this ticker, you’re shorting based on previous resistance; however, even if you short at the top with $5.08 and hold at $4.48, that’s a low winning percentage. We’ve covered tracking the average winning percentage, and if you do so on the first red day, it tends to avoid tickers with extensive market caps above 100-200 million because their base level needs to be much lower. I look for market caps near 20 million with massive spikes on low float because they can drop quickly, but with $SOLO, that’s the difference; we see high market caps with low volatility and tight range, which can make for complicated trades.