The recent market bounce over the last two days can mean the opposite of what you might think for penny stocks…
Since they don’t follow the overall markets, often big green market days mean ‘real’ stocks are popping, and penny stocks are quieter.
That’s because more traders focus on the ‘real’ stocks and try to catch some upside momentum.
It’s similar to the January jump effect I’ve talked about recently…
When beaten-down penny stocks can experience huge bounces in January. It can happen in beaten-down ‘real’ stocks too — just look at Apple Inc. (NASDAQ: AAPL) and Tesla, Inc. (NASDAQ: TSLA) over the last two days.
But whether you swing trade or day trade, or trade penny stocks or ‘real’ stocks — the results of your trade will depend on a good entry.
So let me break down why one pattern worked particularly well yesterday…
The Best Monday Morning Pattern?
I was ready for ‘real’ stocks to continue to bounce this week. That’s why I included three on my weekly watchlist this week
And one particular stock had a nice move that followed one of the best patterns to trade on Monday mornings.
World Wrestling Entertainment, Inc. (NYSE: WWE) was a watch for a weak open red-to-green move.
And that’s the move we got on Money Monday morning before it went up roughly $5 per share.
WWE chart: 2-day, 2-minute candle — courtesy of StocksToTrade.com
What makes it such a great Money Monday pattern?
The red-to-green pattern can be in play any day of the week, but it works especially well on Monday mornings in stocks where shorts are stuck.
They get stuck after a stock has a big Friday squeeze like WWE did…
After announcing that Vince McMahon would return to the WWE board, the stock had a massive gap up on Friday.
It even hit new 52-week highs and didn’t give shorts the chance to get out. They probably added to their position after the stock put in a high on Friday morning.
Then when a stock goes green the next day, like WWE did yesterday, the squeeze is back on. And the stock went back up to retest Friday’s high.
This is why Fridays and Mondays are my two favorite days to trade.
And with higher-priced stocks starting to bounce, I’ll keep my eyes out for more opportunities in beaten-down ‘real’ stock charts if the markets continue to rally.
If your account size doesn’t allow you to trade higher-priced stocks, or you’re not experienced, watch them and see why and how our patterns still work.
It’s all about the psychology behind the trade and finding the right level to join the movement to the upside.
If you don’t know how to make your own trade plans or struggle to follow them follow my weekly watchlist.
If you want my trade ideas every day of the week — get my daily alerts and trade plans here.
From them you can learn why I pick specific stocks, the levels I base trades off, and my thesis behind the idea. And before you know it, you’ll be able to make similar plans for yourself.
Have a great day everyone! See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade