Trading News
Feb. 27, 20234 min read

Missed CFRX’s premarket move?

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Written by Tim Bohen

Yesterday my plan for my number one watch played out to a T. 

But the move happened at a weird time for most traders… 

If you’re new, you might’ve decided to avoid the trade. 

And that’s okay… 

When a stock makes a big move in premarket, it doesn’t mean you missed all the opportunities. There will often be another one…

So today I’ll break down one of the patterns you can look for if you miss a morning spiker.

Don’t miss another early morning trade — get my number trade idea and plan emailed to you every morning in premarket. 

The Pattern to Look For in Premarket Spikers

My number one watch was ContraFect Corporation (NASDAQ: CFRX) for a break over $5. And we got that move in premarket about 15 minutes before the market opened. 

Some SteadyTrade Team members nailed the trade…

 

And I love their exits. 

Because my number one rule for trading in premarket is buy in pre, sell in pre. It’s a good habit to lock in profits when you have them. 

And you can always reassess the stock for another potential setup after the market opens… 

In a low float, day one spiker like CFRX, I like to watch for the stock to pull back at the open and have a dip and rip

This pattern is my favorite for day-one spikers. And it’s straight outta my 10 Patterns ebook. (Get my ebook free along with my three market update videos per week as part of StocksToTrade Advisory here.) 

Here are the criteria I look for in stocks for a potential dip and rip:

  • Low float (fewer than 30 million shares). 
  • Big percent gainer.
  • News.
  • Consolidates or dips below the premarket high for the first 15 minutes of the market open. 

I like the stock to consolidate or dip below the premarket high because that lures in short sellers. And they typically use the premarket high as their risk level. 

Once it breaks above that level is where I would look to enter a trade. 

Then use the chart to determine a good risk level — whether it’s VWAP or a daily low. 

To plan a goal for the trade, try to aim for at least three to one risk-reward ratio. Meaning, if you risk 50 cents per share, a good goal is $1.50 per share. 

Then you can determine your position size based on how much you want to risk on the trade. 

Once you’re in a trade, you can use Oracle levels to guide you through it. 

We didn’t get a dip and rip in CFRX yesterday. But it doesn’t mean it’s over for the stock…

There are other patterns we can look for over the next few days if the stock hangs around… 

I’ll cover those patterns in tomorrow’s newsletter.

Have a great day everyone. 

Tim Bohen

Lead Trainer, StocksToTrade