iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
21,264 Blog Posts

Fade the Opens; Fade the Close

Since the momo train ended in late February, trading in small caps names has been a challenge. If you only kept mega capped Tech you did well. But if you were looking for outsized returns, the type of gains we saw in 2019 and 2020, you tried over and over with small cap and got your head blown off. There have been only a few weeks of uninterrupted rallies and this is not new. As a matter of fact, small caps rarely outperform large and the fact we enjoyed it during 2019-2020 is something we should be grateful for and keep them safe in our memories for if ever the occasion should come around again.

Although I try to recapture former small capped glory almost each and every day, the truth is in the pudding. It has been a waste of time and I am better off narrowing my trading to much bigger companies, perhaps even shelve day trading in favor of swing.

Here are some interesting stats for you to digest on this lovely Sunday evening. The IWM hourly returns over the past month, courtesy of Stocklabs. The data for the entire year is similar. Fade the opens and do not ride heavily long into the close.

I can say with certainty, selling pre-market is even better than selling on the opening tick. Almost always do we see fades at 9:30am, followed by an afternoon bump from 10-1, followed by another dump. Crypto derivative stocks in particular get faded, no matter what BTC-ETH are doing. It is a poor market for momentum, but perfectly fine if you’re diverse and have longer term holding periods.

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One comment

  1. barbee

    Yes, this is me: “momo train ended in late February, trading in small caps names has been a challenge. If you only kept mega capped Tech you did well. But if you were looking for outsized returns, the type of gains we saw in 2019 and 2020, you tried over and over with small cap and got your head blown off.”
    With The Fly’s tools and tips I am GOING TO get out of this rut.

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