In this insane market, where our list of opportunities grows longer each day, having a way to pare down that menu is invaluable.
It might sound like heaven to have a ton of trade setups ready and waiting every morning, and I’m not complaining…
But managing that situation takes focus and discipline.
That’s why today, I want to teach you about the Dip and Rip.
You know how much I love reliable, high-probability patterns.
They’ve proven themselves time and time again, which is why we know the odds of success are high when we enter these trades.
The Dip and Rip fits this criteria to a t…
Even better, it can help you concentrate on just those few good trades out of the abundance we’ve been seeing.
To be clear, you won’t see this pattern every single day, but probably at least three to four times a week.
Trust me, when the Dip and Rip works, it works big!
What Is the Dip and Rip Pattern?
The Dip and Rip has a very specific recipe, and what I love about this setup is that it requires patience.
Most of these plays set up around 9:45 am Eastern, which is why I often refer to it as a 9:45 Dip and Rip.
To learn more about why 9:45 am ET is a key time, particularly for new traders, read my blog post.
Here are the key ingredients of a Dip and Rip…
Low Float:
Under 10 million shares is ideal, under 5 million is even better.
No News:
Yes, believe it or not, we actually want no news.
Why?
Because when a stock gaps up for no reason, short sellers pounce on it, thinking it’s just another pump that will fade. They think it’s an easy short..
They pile in, expecting the stock to fail, which is exactly what we want.
Because if the stock traps the shorts and retests the high of the day, it forces them to cover. And guess what that creates?
A massive squeeze, one of my favorite kinds of trades!
A History of Failing:
Some things you might look for are multiple big red candles, Doji (indecision) candles, and gap-ups that faded all day.
When short sellers see a messy chart history, they get confident that this is an easy-money short.
But if the stock breaks the high of the day, those same shorts panic and cover, which fuels the breakout.
Here’s how it plays out:
The “Dip”: The stock pulls back as short sellers jump in, expecting it to fade.
The “Rip”: Buyers step back in, the stock reclaims its highs, and short sellers get squeezed. This intensifies the buying pressure.
This is where you get those fast, explosive moves.
How to Trade the Dip and Rip
Once you spot a solid setup, stay patient.
7 AM Pre-Market Move:
Watch for a massive gap-up.
No News:
As odd as it sounds, we’re looking for the absence of a catalyst—no hot sector, no news, nothing—just a low-float momentum move.
Wait for the Dip:
Let the stock pull back hard at the open, trapping short sellers.
The 9:45 AM Window:
Wait until around 9:45 AM (remember, this is a window, not an exact time) to see if the stock retests its morning highs.
Entry Level:
Buy in once it breaks that high.
Set Your Stop Loss:
Use VWAP or the low of the day.
Whatever you use, always set your stop loss before you enter the trade.
The Profit Target:
Use a Risk/Reward ratio. I always use 3 to 1.
For instance, if you’re buying a stock at $5 per share and setting your stop loss at $4.50 (risk of $0.50), your target price should be at least $6.50 (reward of $1.50).
And if the stock rips, let it run!
No one ever sells perfectly at the top, but that’s not the goal.
The goal is to trade consistent setups and gradually grow your account.
To spot the Dip and Rip setup, you need a great trading platform that features real-time data, charting, technical indicators, and more.
My top pick is StocksToTrade and I use it every day,
It features everything mentioned above…PLUS, right now, you can get two weeks of both the STT platform and our Breaking News Chat service for $17.
Grab your 14-day StocksToTrade + Breaking News Chat trial today for only $17!
My Final Thoughts…
The Dip and Rip is a proven, high-probability pattern that thrives in today’s market.
- Focus on price, volume, float, and massive premarket gainers.
- Stick to your trade plan and manage your risk.
- Be patient (wait til 9:45 am ET) and let the trade come to you.
If you master the Dip and Rip, you’ll have a powerful weapon in your trading arsenal…
Plus it’s another way to rein in that seemingly endless list of trade setups coming our way!
For more trading insight and mentorship, join my StocksToTrade Advisory service.
You’ll also get a monthly newsletter with a list of my top picks, three weekly videos with my watchlists, bonus reports, and more.
Sign up for StocksToTrade Advisory right here!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade