Happy Monday!!
Sometimes, I lecture a little during my Daily Double Down webinar…
And sometimes I lecture a lot.
Like I did last Thursday…
Here’s what I said:
“Dip buyers ruin everything! They pee in the pool and ruin the momentum for the rest of the market…and for themselves!”
And I’m talking exclusively about dip buying in low-float penny stocks.
For “real”, non-penny stocks, the kind that are perfect for swing-trading or long-term investing, buying on the dip is a great strategy.
But for pennies, it’s a huge no-no.
By the way, if you’re interested in swing trading, it’s the happy medium of day trading and long-term buy-and-hold investing.
Check out the swing trading strategy here in my blog post.
There is indeed a way to trade on penny stock dips and it can deliver big returns.
For example, Oracle gave us a green buy signal in Silo Pharma Inc. (NASDAQ: SILO) last Thursday morning at $2.68.
It went on to top out at $4.50 that same day, delivering a 67.91% gain*.
By the way, Oracle is our proprietary trading tool that I use every single day.
Every morning, it scans the entire market for price trends and patterns and then applies its algorithm to generate a list of the top 20 stocks it identifies as potential winners.
Included in that list are entry prices for both long and short trades.
Find out more about Oracle here.
So what was the pattern that Oracle saw in SILO?
It’s one that I use all the time, and one of my favorites for trading penny stocks…
Here is the pattern that Oracle saw Thursday morning, right before the market opened:
SILO 5-Day; 5-Minute Candles; SteadyTrade
It’s the Red to Green Candlestick Pattern, which I like to call simply “red-to-green.”
Table of Contents
What is the Red to Green Candlestick Pattern?
We see a red to green candlestick pattern when a stock, which opened the day with a decline (forming a red candlestick), reverses its direction and moves up, going past its opening price to form a green candlestick.
Are you new to the candlestick indicator?
Read my article to learn more about it.
The shift from red to green signals a strong change in market sentiment and indicates bullish momentum.
Imagine sitting first in line at a red stop light and waiting for what seems like hours…
And then it changes to green, and you’re off!
Not so fast though, you want to wait a bit for the momentum to build before you press the gas pedal…Also, you don’t want to get a speeding ticket!
That’s where Oracle comes in so handy…It has already identified the pattern and it tells you which price you should wait for to enter the trade.
Why does the red to green move matter?
It’s a signal of strength: The red to green move shows that buyers are getting in with enough force to not only halt the stock’s initial decline but also push it into positive territory.
This is a clear signal of strength and can attract more traders, creating momentum and driving the price even higher.
Momentum Indicator: Stocks that go from red to green often continue to rise throughout the day.
The initial reversal gets the attention of more and more traders, creating a surge in volume and sustained buying pressure. This momentum gives you those sweet intraday gains.
And don’t forget the psychological impact: The transition from red to green can boost trader confidence. Seeing a stock recover from early losses to turn optimistic reassures traders of the stock’s potential, leading to increased buying activity.
How to trade the red to green move:
Identify potential candidates: Look for stocks with high volatility and volume. These are more likely to make significant moves. Stocks with recent news, earnings reports, or other catalysts are prime candidates.
In the case of SILO, this had been a multi-day mover, so I knew that a red to green move would have a higher probability of success.
Set alerts: Use your trading platform to set alerts for when a stock crosses its opening price. This helps you catch the red to green move in real-time.
Speaking of trading platforms, do you have one?
If you don’t, you need one, especially if you’re a day trader.
My top choice and the one I use every day is StockstoTrade.
It has dynamic charts, and stock screening capabilities as well as a selection of add-on alerts services, so you can stay ahead of the curve.
Register for a 14-day StocksToTrade trial today — it’s only $7!
Monitor Volume: Volume is of the utmost importance in this trading play. Make sure the red to green move is accompanied by significant volume. Higher volume confirms the move’s strength and reduces your risk of seeing a false breakout.
Entry Point: Enter the trade after the stock moves above its opening price.
You’ll reduce your risk by confirming rising volume and momentum before you enter the trade. Consider placing a stop-loss just below the opening price.
Ride the Momentum: Once you’re in the trade, watch for continued upward momentum. Keep an eye on resistance levels where the stock might face selling pressure.
Watch my video to learn more about support and resistance levels in trading.
My final thoughts on red to green:
The red to green candlestick pattern is a robust indicator that can help you identify potential breakouts and capitalize on bullish momentum.
As with any new trading strategy, learn as much as you can about it and paper trade the pattern before you bet your actual capital. Doing that will give the confidence to eventually go live and make some real money on the red to green!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
Earnings season is upon us, so learning how to interpret and trade on that information is more important now than ever.
Lucky for you, my friend and veteran trader Ben Sturgill has been working on an algorithm that he uses to predict earnings winners. . . He’s been testing it for the last 18 months and the success rate is pretty unbelievable.
Ben and I are going live next Thursday, the 24th, to show you how to take advantage of the incredible opportunities his earnings tool reveals.
Register here for Operation: Master Calendar. You don’t want to miss it!