The broad market’s been a little wonky the past few days…
Headlines on inflation, tariff uncertainty, Middle East tension, etc., all create chaos.
Does that matter to me?
Absolutely not!
I went through at least ten great day trade setups yesterday morning before the opening bell even rang.
And that’s a normal day! Penny and day-trade stocks don’t care what the broad market is doing.
To get in on this pre-market action yourself, you have to join me for Pre-Market Prep.
Pre-Market Prep is available exclusively to members of my Daily Income Trader System. Learn more about it during one of our free daily webinars.
With DIT, you’ll also get my watchlists, three other daily webinars, trade alerts, and much more…
Master your trading game with Daily Income Trader.
And if you’re looking to start every week off with even more big price action, check this out…
Every Monday, the market kicks back into gear after a weekend of rest… And that reset creates a unique opportunity!
Right at 9:30 am Eastern, as the opening bell rings, we look for a very specific setup that often shows up like clockwork.
I call it my Monday Setup, and it can lead to some explosive moves.
Take this past Monday…
Presidio Property Trust (NASDAQ: SQFT) spiked an incredible 104%* after the company announced pricing of a direct offering of common stock.
These are the kinds of morning spikes we hunt for every Monday!
Want to learn how to spot them for yourself?
Watch the video below for the full trade breakdown and strategy tutorial.
With all of these day trade opportunities coming our way, one of the key principles we focus on is very simple…
Table of Contents
Ride The Hype, Ride The Momentum, And Ride The Volume
This is what we’re looking to do, particularly on the front side of a big stock move…
That’s your edge as a long-biased trader.
Get in early while the volume’s flooding in, ride that wave of greed…
And then, if you’re experienced enough, consider shorting the back side when the excitement fades and fear takes over.
The beauty of these volatile, fast-moving stocks is that you’ve got two solid opportunities:
#1 Buy the front side: This is where the story is just starting.
#2 Short the back side: The dream begins to fade, and panic hits.
Trading Is About Human Emotion: Hype, Fear, and Greed
Short-term trading isn’t about fundamentals or long-term trends.
It’s about human nature… And we can capitalize on that.
- Buy when everyone’s greedy.
- Short when everyone’s scared.
When market participants are piling in at any price, and volume is increasing, that’s your time to pounce.
Just remember:
Don’t marry the stock. You’re not in it for the story, you’re in it for the price action… that’s it.
And on the flip side, if you’ve ever been stuck holding a stock after the hype fades, you know how brutal that can be.
Everyone exits the stock at once, and that selling pressure creates massive downside.
But if you’re a short seller, you’re smiling big because you were in before the panic began.
Remember, short selling is just the same as going long, but in reverse.
You sell first, buy later.
You’re still buying low, selling high, but it’s just flipped in order and timing.
If that sounds a little confusing, check out my blog post to learn all about short selling.
Most Traders Are Long-Biased, So Let’s Talk About Tops
Let’s talk from the long side, and specifically, how to recognize topping action so you can lock in gains before the stock rolls over.
#1 The Shift in Zeitgeist: When the Hype Dies
The first thing to look for is sentiment…
It’s what everybody’s talking about in the news, on social media, at the gas station.
That’s when you know the hype is real. That’s when you hold. You ride the wave because everyone’s obsessed.
But when that buzz starts fading and you stop hearing about it, that’s your first red flag.
If a stock’s up 100%, 200%, and nobody’s talking about it anymore, you need to ask yourself, “Is there anything left to push this higher?”
#2 Fading Volume
Out of all the signs, volume is king.
Volume tells the real story. Forget the news and the press releases…
If buyers disappear, the party’s over. It’s time to get out and go home.
I rely heavily on the 60-day average volume as a benchmark. When a stock spikes with volume well above its 60-day average, that’s day one of the move.
- Day one: Monster volume.
- Day two: Maybe a pullback.
- Day three: Look for a possible re-breakout.
If that re-breakout fails, and volume fades… watch out. That’s your clearest sign that momentum is dying.
Volume. Volume. Volume…
Without it, nothing moves.
#3 Multi-Time Frame Price Action
You also want to monitor price action across three key timeframes:
- The 1-year / 1-day candles chart
- 15-day / 15-minute candles chart
- 2-day / 5-minute candles chart
You’re looking for:
- Failed breakouts
- Lower highs
- Breakdown below VWAP
- Trend reversals on all three timeframes
If a stock starts failing to make new highs, fades below VWAP intraday, and can’t reclaim key levels on any of those timeframes, momentum is done.
That’s your third signal.
My Final Thoughts…
Look for the “three tells” of a topper I described above…
- The buzz is losing traction.
- The volume is fading (relative to 60-day average).
- There are failed breakouts on multiple timeframes.
When you see all three, it’s time to get out of your trade.
Don’t fall into the trap of ignoring these signs just because you’re in the green and get greedy…
That’s how you turn winners into losers.
You can want whatever you want, but if hype, volume, and price are all fading, you’re fighting a losing battle.
These stocks move fast… That’s why we trade them.
But don’t overstay your welcome.
Nail and bail. That’s the Bohen way.
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
Learn how to make gains from the other side of a short sale.
If you’re a new trader, you need to follow this rule. Period. End of sentence.
I hope you’re watching this sector.