With all of the amateurish comments and predictions which come out when total crapster penny/small stocks have their 1-3 day rocket ships, it’s instructive to consider a few things:
Don’t ever get swayed by price action alone. Weak hands piling into something is never bullish for more than a short-term trade. They can be extremely helpful once you’re in, but they’re very fickle, and will turn and run with their tails between their legs at the first little selling wave. The best trade opportunity is to buy into the little reaction areas in the momentum push higher, as long as the trend (momentum) is still up. I like to “draw boxes” on the chart (trading ranges). This can be very helpful with identification/recognition of the specific trade setups. If you don’t know how to “draw boxes” on a chart – there’s info on our website about that.
The other trade with these momo stocks, as long as the trend (momentum) is still up, is to buy the new intraday highs. I find those to be much lower probability trades, but some people are good at identifying /weeding out the high vs the low probability opportunities. They can do well with those.
Weak hands love buying strength way too late, and they come up with numerous reasons (guesses), after the fact (rear view mirror), why the stock is going to $500/share. So for the amateurish commentary out there: “I have the probability numbers worked out for this – for a stock that goes thru zero period of preparation, and then the rocket ship rally, with at least two buying climaxes. The probabilities are extremely high for at least an x# (very large) selloff. If you don’t know what a period of preparation is, that is a problem.”
So here are some recent stocks, a couple which I daytraded only (broker confirms with the trade posts) which were supposedly going to the moon. Look at the first three charts. The fourth chart is AEZS today (video post) – look familiar? I wonder if Elvis Costello was a daytrader? (click charts to enlarge):
>The best trade opportunity is to buy into the little reaction areas in the momentum push higher, as long as the trend (momentum) is still up.
Hi, Scott! How do you know that momentum is still up?
That is the tough one Dmitry. This was a public post. I’m doing a video for subscribers on that – probably post today.