As we’re currently in a market full of enough setups to make your head spin, managing that endless list can be your biggest challenge.
That’s why I want to show you specific patterns you can look for to narrow down your choices so you can focus and block out the noise.
Of course, high-quality, high-probability setups are the name of the game and what we’re always on the hunt for. These are the ones that have proven themselves over and over again.
So today, we’re diving into one that I talk about all the time with my Daily Income Trader and StocksToTrade Advisory members, especially when it comes to swing trades.
Let’s break down the Weak Open Red-to-Green (WORG) setup…why it works, how to spot it, and how to trade it effectively.
Table of Contents
What Is the Weak Open Red-to-Green Setup?
You can apply this pattern to all kinds of stocks, including penny stocks, but it’s especially powerful with higher-priced stocks with strong fundamentals…ones that keep attracting short sellers.
What happens is that a stock closes at or near its day highs for weeks on end, and then it finally opens with a red candle. This lures in the shorts.
But great for us is that too many short traders jump in too soon. They pile in early in the morning, expecting a major fade, but instead, the stock grinds back to green and explodes higher.
And that’s why this setup works so well… because traders keep trying to call the top too early, setting up massive squeezes when they’re wrong.
Criteria for the Weak Open Red-to-Green Pattern
To find a good WORG candidate, look for the following…
The Stock Closes at or Near the High of the Day:
If a stock finishes strong, it signals momentum.
Multi-Week or Multi-Month Breakout:
The best setups are breaking out over multiple timeframes. And if it’s a 52-week high or an all-time high, all the better!
Hot Sector Plays:
If a runner is in a hot sector, it has even more strength.
On a Watch for Monday:
This is a weekend setup, meaning if you spot it on Friday, you can prepare for a potential trade on Monday morning.
It’s great because you can plan ahead and enter the new week with a game plan.
Speaking of game plans for the coming week, make sure you’re checking your inbox every Sunday for my FREE 5-Stock Weekly Watchlist!
And This Setup Works Even in a Weak Market
This pattern plays out even when the overall market is weak.
Why? Because it’s based on price action and short squeezes, not the overall market direction.
This is the power of focusing on what moves, even if it’s not following broad market sentiment.
Risk Management
Every great trade starts with a clear risk plan.
Use the morning low as your stop:
If the stock goes red but fails to recover, exit the trade at the morning low.
And as always, set our stop before you buy the stock.
Risk small to win big:
I always advise using a 3-to-1 risk-to-reward ratio.
In other words, if you buy a stock trading at $5 per share and think it could go to $8 ($3 of reward), you would set your stop loss at $4 ($1 of risk).
Even if you only catch part of the move, a 3-to-1 ratio is still a solid trade.
If the stock never goes green, you don’t trade it:
It’s straightforward. No confirmation = No trade.
This will keep you safe and prevent unnecessary losses.
Use the Right Tools
Spotting the WORG setup is easy…as long as you have a great trading platform that includes 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…
This WORG setup is one of my favorite patterns for swing trades…
And remember, it works with penny stocks too.
It works because it traps shorts, which is the kind of situation that leads to explosive upside moves.
And the best part is that it gives you a clear trade plan with easy entries and a defined risk level.
In this insane market, concentrate on the setups that are consistent and time-tested, and the WORG is precisely that.
Learn the pattern, study it, practice it, and add it to your trading arsenal today.
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
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