Yesterday, Hycroft Mining Holding Corporation (NASDAQ: HYMC) was a great example of why we don’t anticipate moves based on news…
The company dropped some big news in premarket. But instead of spiking, the stock tanked!
If you thought the news was good and bought at the open — you got crushed. Especially if you don’t have discipline and a stop.
So what happened?
We had a detailed discussion about HYMC in premarket prep and the SteadyTrade Team morning webinar.
I warned traders what to watch for and outlined my ideal plan. Here’s how you could have stayed safe in HYMC…
Why HYMC Tanked at the Open
Hycroft Mining Holding Corporation (NASDAQ: HYMC) was a Breaking News Chat alert winner last week. I also highlighted it here last Wednesday after it soared in sympathy to increased metal prices.
Yesterday it had premarket news — the company secured a private placement investment worth $56 million from AMC Entertainment Holdings, Inc. (NYSE: AMC).
Sounds like good news, right? The company was just handed over $50 million from a large, well-known company — and former meme stock.
If this news dropped last year, the AMC army could have rocketed this low float stock to the moon...
But that’s not all the news. The CEO was also scheduled to go live with Jim Cramer on CNBC.
So with all this hype, why did HYMC tank at the open?
My short answer: I don’t care. It’s just a low float junk penny stock that squeezed on BS news.
But here’s the detailed answer:
- The CEO canceled his CNBC appearance
- Profit-takers exited
- Short sellers attacked it
Suddenly, the news wasn’t what people thought. The hype vanished.
Bag holders from last week got their dream of getting back to breakeven. Anyone with profits was happy to sell into a 100% gap-up…
And when short sellers see a stock up 100% in premarket, they think it’s up too much. So they short it at the open and risk the premarket highs…
It’s not a bad strategy. This time, shorts got lucky when the CEO canceled his scheduled appearance. That killed all the demand.
If you bought at the open and anticipated a big spike on the AMC news and CEO appearance, you made a crucial mistake.
Here’s the better way to approach sketchy penny stocks…
The Safe Way to Trade HYMC
I only had one plan for HYMC yesterday. And again, having a trading plan prevented a disaster…
HYMC was downtrending since Friday afternoon. There was no reason to be in this before the news dropped.
If you missed the spike on the news — or you don’t like premarket trading — there was only one trade option…
A morning dip and rip.
In my Steadytrade Team webinar, I explained what to watch for…
I wanted to see the stock pull back at the open to lure in shorts. Then I wanted it to break above the premarket high and $3 key level when the CEO appeared on CNBC. $2.50 was my risk level and my goal was a squeeze to $4.50+.
That’s it.
I didn’t get excited about the news. And I didn’t have a bias or expectation. Here’s what I said in my morning webinar…
- I don’t care if this stock fails and goes to $1.
- It’s not a dip buy.
- It’s not a buy on a VWAP reclaim.
- Assume the news is a scam.
- Watch out for an offering. (Later in the morning, news dropped that the company will do one next week.)
- Use one of our day trading patterns and react accordingly.
Remember: The market doesn’t care if you think the news is good. Opinions don’t matter. And things change fast.
That’s why we trade price action, momentum, and patterns.
And we don’t anticipate stock moves — we react.
Before you take a trade, make sure a stock checks all the boxes. Always have a trading plan and a stop.
Waiting for HYMC to react to the news — and having a trading plan — would have saved you from a losing trade.
That’s why we have detailed discussions on potential trades every morning in the SteadyTrade Team. Being part of a team that has your back can help you stick to your plans. Join us and work toward getting 1% better every day!
Have a great day, my friends.
Tim Bohen
Lead Trainer, StocksToTrade