Long traders have been able to ride the AI momentum in large caps like I’ve been talking about for a while…
But for those of you with a small account, you can’t afford to buy a big enough position in a $200 stock to see any meaningful gains in your account.
So you have to dig to find the best setups working in penny stocks…
Right now, most of them seem to dump at the market open.
So you have to be creative … You have to be one step ahead of the next trader…
Right now, that means getting up early and preparing in premarket. It’s also where some of the best trades are playing out in the last few weeks.
So let’s dive in and dissect what to look for…
The Perfect Pre-Market Pattern?
Aeglea BioTherapeutics, Inc. (NASDAQ: AGLE) dropped news in premarket yesterday … And its trading activity was incredible!
It traded 22 million shares and gained a whopping 400% in just 10 minutes!
But when a stock makes a move that quickly, you can’t just jump in and chase. You need the right plan and a risk management strategy to put you in a high-odds trade.
So what was the setup to look for in AGLE?
Let me break it down…
I gave traders this plan during Pre-Market Prep, 15 minutes before AGLE continued higher, and ultimately gained 877%!
The Importance of Chart Development
As I said, you can’t just jump into a 400% gainer and risk buying at the top.
I thought that AGLE could go higher, but it’s crucial to be patient and wait for the chart to develop…
That way you can maximize your risk to reward.
A lot of you know my favorite whiteboard drawing — I’ve probably drawn it a million times…
It shows you that after a big spike, I like to see the stock consolidate…
That gives me some sort of consolidation area to risk off of.
Then if the stock breaks out of consolidation to the upside, I can enter and have a clear risk level at the bottom of the consolidation area.
And I can take profits on the way up. Or cut the loss if it breaks my risk.
So at about 8:33 a.m. Eastern, I gave traders that plan and drawing…
Then about 15 minutes later — just as Pre-Market Prep was ending — AGLE started to make its move.
Now, I’m not saying that my whiteboard drawing is an exact replica of what AGLE did. But can anyone dispute that there are some striking similarities?
AGLE’s price action aligns with the premarket pattern we’ve seen working for the past two weeks.
It’s like a dip and rip that happens in premarket.
First, we see a big spike, then a dip or some consolidation to form a risk level, then a secondary spike where you can enter as it breaks the premarket high.
But remember the rules for trading in premarket…
Don’t get greedy — buy in pre, sell in pre.
Be patient and wait for entries, whether you trade in premarket or regular hours.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade