As day traders, we’re always looking for explosive upside moves — like the one I alerted traders to on my FREE weekly watchlist on Sunday.
The stock actually had a bigger and faster move than I expected.
So let’s break down how and why the move happened … And which rules you can use to trade these big spikers…
Because trading’s all about being able to recognize moves and patterns that repeat.
And I talked about this stock all last week before this move happened.
Get ready for the next one now!
What Happens When Shorts Guess Tops?
In almost every webinar last week, I was like, why…?
Why are people shorting a stock poised for a breakout to new 52-week highs?
It’s not a high-odds shorting opportunity. If you want to short — wait for the first red day.
But as a long trader, you gotta love the short sellers’ stupidity…
It’s what creates absolutely beautiful breakout moves like this…
TMC chart:1-year, daily candle — courtesy of StocksToTrade.com
I had TMC the metals company Inc. (NASDAQ: TMC) on my FREE weekly watchlist to watch for weak open red-to-green moves.
I didn’t expect it to make such a big move … I thought it would just grind slowly higher.
But this is what happens when shorts keep trying to guess tops.
You get explosive moves to the upside.
But when a stock has a big gap up like TMC did, it can make it tough to trade…
There are no key levels nearby for you to use as entries and risk levels.
In the case of TMC yesterday, using my buy in pre, sell in pre rule was a good play.
It’s a rule that comes into play on stocks that are trading around $3-$4 or more per share…
Right in the price range that short sellers like to attack stocks.
You could’ve bought the break above the $2.79 Oracle level in premarket and sold before the opening bell…
Or you could’ve bought the break above the premarket high right at the open.
But you can see it failed quickly after that spike. And that’s why waiting until 9:45 a.m. or later is a better approach for new traders.
TMC chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
I think shorts are still guessing tops in TMC…
Their risk level is now likely $3.20.
But now that it has consolidated for a day, we have clear levels to use to plan a trade for tomorrow.
If you want to know which levels I’m watching — tune into a live webinar here to learn how to get access to Pre-Market Prep.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade