One topic that’s crucial for traders to understand is when to deviate from your trading plan.
I wrote about it a few weeks ago and explained the only situations that constitute changing your trading plan once you’re in a trade…
And one of those instances came up on Wednesday after I sent out the trade plan for my number one watch.
So today I want to go over this crucial lesson again and show you why it’s so important to adapt when necessary…
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Why SHOT Tanked $3 Per Share
Safety Shot, Inc. (NASDAQ: SHOT) was my number one on Wednesday.
I broke down my trade idea and thesis in detail on Pre-Market Prep… (Attend a live training session to learn how to get in.)
The stock was climbing up to the gold Oracle support and resistance line.
And that’s a crucial level that marks where the algorithm thinks the price action switches from bearish to bullish.
It was right around the $5.50 level which is also a key half-dollar level — not a coincidence.
So it was clearly a key level.
My plan was to buy a break above that level with risk at the lows of premarket consolidation in the $5.20s, and I had a goal of at least $1 per share.
I thought it was a solid plan in a stock that’s the biggest squeezer of the week…
We were heading into the holiday, so I didn’t think shorts would want to hold it…
Plus, even though the stock sold off heavily the day before, in the premarket, it was looking like the stock would open green (and it did).
For me, it was worth risking 30 cents for a potentially bigger move in a stock with a lot of range.
And after the market opened, it did squeeze to $6.
But that’s when something happened that changed the plan…
I always say to stick to your trading plan, except when:
- Macro news hits that changes the market environment.
- Or news hits the stock you’re in.
And negative news hit SHOT right after the open…
The Breaking News Chat team alerted that a short report was out on the company at 9:43 a.m. Eastern.
So basically my thesis was right — shorts didn’t want to hold and needed to bail themselves out…
All these big-time short sellers know each other. So of course they band together to get a short report out to bring the stock down.
But regardless of my crazy ‘theories’ about that, as a trader you have to be ready to adapt to these quick changes in the market.
The market doesn’t care what you want or what you think…
You have to adapt fast and that starts with having the right tools that keep you in touch with the pulse of the market.
Or you get caught in moves like this…
SHOT chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
StocksToTrade’s Breaking News Chat can help you stay on top of positive and negative news.
My Pre-Market Prep sessions and the Breaking News Chat are both part of our Daily Income Trader System.
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Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade