If you’re new to trading the crazy, volatile stocks that I love, I have the perfect setup for you.
It’s a must-know and it helps you avoid impulsive, FOMO-driven decisions.
And best of all, in my opinion, it’s one of the most high-quality, reliable setups out there…
I hope I don’t need to tell you that those are the patterns I’m always on the lookout for.
These things show up every single morning during premarket, so finding them isn’t the problem. The only challenge for you is trading them right, which is why I’m here.
To prove these things really exist, I’ll use a real-world example from last Friday.
It was a big win for all of us who saw it coming, including Oracle users!
Now, before we dive in, let’s talk about pre-market trading…
If you’re a new trader, or even an experienced one, pre-market trading is risky. It’s like the Wild West where stock moves are very unpredictable.
Sure, you can trade in premarket, but can you handle the extreme volatility? And can you stick to a stop loss? If not, you’re setting yourself up for failure.
And that’s where the morning fader setup comes in. It helps you avoid all the traps traders fall into when they chase spikes too early.
Table of Contents
The Pre-Market Trap: Don’t Fall for It
A stock drops a press release at 7:45 a.m., you see it spike, you chase it up… and then it instantly sells off.
Now you’re stuck.
Next thing you know, it’s 8 a.m., then 9 a.m., the stock is still falling and you’re bag-holding, hoping for a miracle.
If that sounds familiar, STOP trading pre-market…
Instead, focus on morning faders.
A Recent Textbook Morning Fader Setup
BioXcel Therapeutics Inc. (NASDAQ: BTAI) presented the ideal morning fader setup Friday morning.
It Dropped News:
During premarket on Friday, BTAI dropped a press release announcing it had regained compliance with NASDAQ.
Even news like that can create enough hype for an early morning gap-up.
Huge Spike Followed by a Fade:
Right after the earnings release, SOUN spiked about 70%*.
But then it started to grind lower into the open. That, my friends, is the pre-market fade we’re looking for.
Why does it pop after the fade?
Just like a lot of the great setups, it attracts early short sellers and sets the stage for a squeeze at the open.
Insane Float Rotation:
This stock was a low floater—around 4.5 million shares—and by market open, its float had already turned over multiple times.
Why does float rotation matter?
The more times a stock’s float turns over, the more explosive it can be. The biggest movers of the day almost always have high float rotation.
To spot the morning fader pattern and others, you need the right data at your fingertips.
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Trading the Morning Fader
Here’s how to properly execute this pattern.
Look for the pre-market fade into the open:
This traps early short sellers, setting up the squeeze.
Wait for confirmation.
The best morning faders don’t collapse immediately—they lure in shorts first.
Use Oracle for entry signals:
As soon as BTAI showed strength at the open, Oracle alerted an entry at $1.98 per share.
This is why I use Oracle every single day. It made this trade a no-brainer. It gave an entry price and stop loss level. What else do you need?
Here’s what BTAI looked like on Friday…
BTAI 2-Day, 5-Minute Candles Chart; SteadyTrade
After bypassing the Oracle signal, BTAI hit a high of $2.82 for a return of 42%*.
My Final Thoughts…
The morning fader is one of the best patterns out there and perfect for newbies, but only if you trade it right.
Don’t get trapped in premarket trading.
Since you’re waiting until the open, the premarket fader gets you in on the action of the fast-movers but with a lot less risk.
And Oracle makes it even easier.
To experience our algorithmic tool in real time, register for one of our FREE daily webinars.
We’ll show you how it works and why you need it in your trading arsenal.
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade