At least five stocks in the same sector all gained over 50% yesterday — most gained over 100%!
You might think they’re in the red-hot artificial intelligence sector … But you’d be wrong…
There’s another sector that traders are getting excited about.
Buyout news for one company has sparked a new interest in these low-priced stocks…
Want to learn how to trade them?
Today I’m sharing the stocks in this sector that are soaring … And how many of my patterns can be used together to trade them…
The Newest Hot Sector?
Buyout news for BELLUS Health Inc. (NASDAQ: BLU) sent it up 100%. And I think that injected some excitement into the biotech sector.
Uneducated traders see the news and that big move and think that they can buy any small biotech company and hope for buyout news.
We had five big biotech percent gainers yesterday. Here are their percent gains from Monday’s close to yesterday’s high:
- Allarity Therapeutics, Inc. (NASDAQ: ALLR) — 166%
- Gamida Cell Ltd. (NASDAQ: GMDA) — 63%
- SAB Biotherapeutics, Inc. (NASDAQ: SABS) — 88%
- Dermata Therapeutics, Inc. (NASDAQ: DRMA) — 148%
- Bright Minds Biosciences Inc. (NASDAQ: DRUG) — 104%
But as day traders who focus on using the right process, strategy, patterns, and risk management — we know holding and hoping isn’t a strategy.
So let’s get into how I approach trading these stocks using the tools in our trader toolbox…
The patterns in my ebook can all be used cohesively to trade hot sector stocks or any stock that has the potential to become a multi-day runner. This is how I like to use them…
First, on day one, I like to look for stocks to have a 9:45 a.m. or later dip and rip.
That gives the stock time to prove it can hold up, and that it can make new highs. That was the move I was looking for in ALLR yesterday.
And it worked…
ALLR chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
The stock broke above its premarket highs just before 10 a.m. Eastern and gained 65% from that level.
Whether or not a stock I’m watching for a dip and rip makes the move, the next pattern I watch it for is the VWAP hold, high-of-day break pattern…
I want to see a stock hold above VWAP all day or at least chop around it sideways all day.
Then I want it either to hold above VWAP or reclaim it, and then break above the high of the day.
If the stock doesn’t have either of these patterns and ends up closing near its lows — let it die.
But if a stock with a big gap up holds up into the close — even without a big morning or afternoon move — it stays on watch.
Because the next day I’m watching it for a weak open red-to-green move or a break above the previous day’s high.
Most of the big runners from yesterday closed weak, so they might not have much follow-through today.
But that doesn’t mean there won’t be a new trashy, low-float, biotech running this morning…
Ideally, it will have news so it has more legs to run for multiple days.
Either way, this sector is on most traders’ radars now so it could be in play for a while.
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Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade