This is a general recap of a few trades I did one week when the market was hot, sharing some of the general do’s and don’ts when the market is hot.
This is a decent BAM short, but it wasn’t an amazing BAM short since the neutralist areas are around $2.08. What we saw was heavy resistance and no volume trading across the board until Friday, and the $2.00 area is very close to the $3.00 area. The maximum spiking percentage is around 30%-40%, and the stock started spiking at $1.91. Overall it spiked about 40%. This doesn’t really meet the criteria for a BAM short. A BAM short needs at least 50% for it to work. If it doesn’t meet the criteria or it barely meets the criteria, the risk-reward is not worth it. If you take a look at this parabolic short and short into resistance, you can see the stock came back from $2.41 and never crowded $2.40 or $2.36. And at the end of the day, it actually squeezed.
If you’re really shorted, for example you break down around $2.70 or $2.65, if you want to cover the end of the day then you make nothing because the risk reward is not there. So, you need to be careful when doing this. When you are using BAM short strategies, always make sure the last spike is enough, has good risk reward, and trading started on a volume.
If the stock doesn’t really trade starting on a volume, then the stock becomes untradeable. If you’re trading too much volume, let’s say for example it started trading at 70 million volume per day, you can take a look at the resistance and see that the stock doesn’t really have enough resistance to hold this 70 million volume in trading. If the volume is too much, make sure to cut it off quickly. If the volume is too low, you cannot trade because you will affect the volatility and you won’t be able to execute well.
So IMRN is also a gap up short. If you take a look at this chart, you’ll notice no resistance whatsoever, except this one line of resistance which doesn’t really count. Wait until the stock forms a correction. Make sure it does start losing momentum, then go ahead and short it. The correct area or shorting point is around this 657-fill perk. Sometimes if the stock is on low flow, it can spike about 20-30%, sometimes even 100%. Within this half-hour try not to place any trades until the stock starts to lose momentum.
What do I mean by losing momentum? It needs to crack 50% before it will completely start to lose momentum, and then the risk and reward will come into play. Sometimes the stock loses 50% of its own gain, for instance $7.39 will go back to $5.21. If it’s trading this volume, let’s say it’s trading around 30 million/40 million at $12.45, then it will trade about 60 million overall. So where are those 20 million/30 million shares going to go? It’s going to trade. When the stock shows low float, it’ll cause a high demand which means the stock goes up. You can play those weird situations where the stock really breaks the morning high but squeezes after a few hours. So always be careful with those gap up shorts.
I wouldn’t suggest trading these as a beginner. I highly suggest avoiding plays without resistance. Don’t try to guess. Wait until the stock forms a correction. Make sure it loses momentum or starts spiking. The key is don’t trade the first 20 minutes until the stock makes its decisions.
Next let’s talk about MTP. This one was also very crowded. The stock becomes untradeable if the premarket volume is over 4 or 5 million. If it does have resistance, it depends on how heavy the resistance is. If the stock does not have heavy enough resistance, the stock trader tends to break off its own resistance if he is trading too much volume pre-market. And when you’re looking at 4 million/5 million/6 million volumes in the pre-market, don’t try to trade those types of tickers.
I sized in small. I needed to disperse and short it a little bit, charm the live trade, and cover the $1.80. I made $13,000. In my experience I’ve made about 18,000 of those plays and I always size in very small. I didn’t really have a super good risk/reward ratio. If the stock loses its momentum in the first couple candles you don’t have a great risk/reward ratio.
Always size in small. It’s better if you have resistance because you can size in a little bit more. If you don’t have resistance, you’ll want to make sure to size in small. And when you don’t have that much potential to make large gains, make sure you cover into the weakness all the way into the close.