Yesterday morning, I found a stock that was following one of my favorite patterns.
At 8:06 am Eastern during my Premarket Prep, MicroAlgo Inc. (NASDAQ: MLGO) was the only stock showing up on my low-float gapper scan.
It showed everything I look for in a potential play:
Low-float stock…check!
Former runner…check!
I’ve been doing trading webinars for a decade and I’ve looked for the same thing every single day…
And what I look for every single day is exactly what MLGO was showing us on Monday morning.
I advised buying at $5.12 per share.
Take a look at what MLGO did after I discovered the premarket setup.
MLGO Morning Intraday, One-Minute Candle Chart; SteadyTrade
It reached a high of $8.64 later that morning, for a gain of 68.75%*!
This is a staple pattern that shows up time and again, in all market conditions.
Best of all, it’s pretty straightforward and easy to find, making it a perfect concept for new traders to learn.
Let’s not waste any more time…
So let’s talk about one of my all-time favorite patterns.
I call it the “dip and rip.”
You may have heard of a “weak open, high-of-day break.”
Some traders call it a ‘weak open, high-of-day break,’
I certainly didn’t discover the pattern myself but I did change the name to “dip and rip.”
Here’s how it works:
It starts with a strong open, followed by a quick dip in the stock price.
After that initial brief dip, the stock returns to its previous high, and sometimes, it “rips” even higher.
Sometimes it reclaims its high soon after the setup is spotted, but sometimes it can take all day…
Patience is key
When traders spot the dip and rip pattern, many feel a sense of FOMO and can’t help themselves from jumping in head first.
And why is that a problem?
Because right after the market opens, a lot of those premarket spikers gap down and everybody that got in too early gets stopped out.
The way to play a dip and rip is to be patient.
Wait until those others cut their losses. In fact, wait until 9:45 am Eastern and buy on the dip.
If you were wrong about what you thought was going to be a rip and dip, cash out early …
If you were right about what you saw, ride the stock up to make big profits.
Waiting these things out is crucial to risk management. Every trader must know and understand how to manage risk.
Read more about it here.
Important points about playing the rip and dip.
Timing is everything.
Premarket trading is tempting to a lot of traders but trading volume is very low during this time, stocks can move away from you very fast, and it usually works against you.
To capitalize on the dip and rip pattern, waiting until after the market opens is best…and besides, it teaches patience and focus.
Look for the right stocks.
The ideal dip and rip candidate is up premarket.
Although this wasn’t the case with MLGO, a second condition may be that the stock is running on news.
By the way, successful traders are always on top of the news that moves stocks. Unfortunately that takes a lot of time and work…
Good thing our Breaking News Chat service does all the work for you.
The third thing I look for is that it was a former runner.
Take a look at MLGO’s chart over the past month. You can see how it popped back on June 4th.
MLGO 1-Month, 1-Hour Candles; SteadyTrade
And the fourth condition is that it is a low-float stock.
Be disciplined in every trade.
Greed can kill your trade.
If the stock doesn’t follow the pattern, it’s probably time to exit.
And even if it does follow the pattern, don’t overstay your welcome.
These stocks tend to fade, so take the small gain and move on. Selling too late often leads to regret.
Now back to MLGO…
I showed you what it did after I spotted the dip and rip setup premarket…That was a big gain!
But look where it ended up right before the market close.
MLGO Intraday, 1-Minute Candle Chart; SteadyTrade
You could have taken that original gain yesterday morning of 68.75%, and you would have been perfectly happy.
But if you held on and rode it higher until it peaked in the afternoon, (which has everything to do with your level of risk tolerance), you could have made 207.62%*!
Like I said, I look for a MLGO every single morning…and you should too.
But don’t stop with dip and rip trading…
If you’re interested in a type of approach that is less stressful than tracking volatile, quick-moving stocks but also requires less wait than a buy and hold strategy, swing trading might be for you.
And I have the perfect tool for swing traders. It’s my proprietary system, IRIS, that uses the “Artificial Intelligence Code” (ASI). It gives you everything you need…
Weekly live training sessions, an ASI-generated watchlist, weekly analyst reports, and much more.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade