Today I’m continuing the topic of patterns to look for after a stock has a big day-one spike…
Yesterday I used ContraFect Corporation (NASDAQ: CFRX) as an example and noted if you miss a big premarket move, you can always watch for a dip and rip after the open.
Another pattern you can look for on day one is the VWAP hold high-of-day break pattern.
If you missed yesterday’s newsletter — read it here to catch up.
Whether or not you see any patterns in a day one spiker, you can still watch it over the next few days…
Because if you see either of the patterns I’m sharing today, it could mean you have a multi-day runner — and those are some of my favorite stocks to trade.
This is the process that we repeat as stocks pop up on news and as they play out over the following days.
Dilution killed CFRX, but there’s always another stock to watch…
Here’s an example of what to look for on day two or three of a stock’s run…
Patterns to Look For in Multi-Day Runners
Once a stock spikes on news and holds up — then we can look for follow-up patterns…
Like the weak open red-to-green move and the day three surge.
Let’s look at Ambrx Biopharma Inc. (NYSE: AMAM) as a recent example of a multi-day runner…
The stock spiked on February 16 after the company announced data from its phase one trial.
On day one it had a similar move to CFRX on Monday… Although AMAM didn’t spike in premarket, it spiked right at the open and didn’t pull back for a secondary entry.
And like CFRX, it didn’t have a dip and rip or a VWAP hold in the afternoon on day one. But the next day it did have the next pattern we look for…
AMAM chart: 2-day, 2-minute candle — courtesy of StocksToTrade.com
A red-to-green move is when a stock opens below the previous day’s close. Then it reverses and breaks back above it.
You can see how anyone who shorted AMAM after the big spike was comfortable in their position — until it made the red-to-green move.
The move indicates a trend change. And as shorts start to buy to cover it sends the stock higher.
And when the stock closes near its highs, we can look for the next pattern…
AMAM chart: 3-day, 2-minute candle — courtesy of StocksToTrade.com
The day three surge is when the stock breaks above the day one high and continues higher.
And after you get that move, you can repeat the process and look for the same patterns over and over again…
After the last day on the chart above, AMAM consolidated for a day and then made another break higher.
It was a day five surge over the day three high…
AMAM chart: 3-day, 2-minute candle — courtesy of StocksToTrade.com
This is why we focus on the same repeating patterns.
The key to capitalizing on them is to wait for them and not get blown up trying to trade random moves when a stock isn’t doing anything.
If you can master your patience, discipline, and mindset, you can give yourself the edge you need to perform at a high level.
If you want some help spotting opportunities in the market — sign up to get my Market Update videos three times a week.
You’ll also get my monthly report, an exclusive weekly watchlist, and a copy of my 10 Pattern ebook so you can see which patterns I focus on and watch the process repeat.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
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