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
20,179 Blog Posts

Speculation Runs Rampant as Markets Press Record Highs

I just closed out the following trades.

SDGR +12.3%
DAO +2.5%
DAO +14.3%

They are notable for two reasons. One, the SDGR was purchased yesterday, so obviously I am pleased with the overnight success. Second, DAO was an average down, something I rarely do but when I do I am rarely wrong. I turned a loss into a net profit, which is always a good feeling.

How did I know they’d go higher?

I wish I could tell you exactly how — but I will walk you through my process, which is essentially the same process I go through before 90% of my trades.

I use this screen inside Exodus. For those who aren’t members, it searches for stocks up 2% for the day, within 1% of session high, with a technical ranking score over 3 (very bullish), and that trades more than 100k shares per day. This screen will more often than not produce the biggest movers of the day that are sticking their gains. Ergo, within 1% of session highs. For people who do not trade momo, you might find yourselves getting sick at the prospect of buying a stock already up 15% for the day at times. Also, at times, you will buy something that reverses the next day. The best thing to do with those, normally, is cut losses quickly — because the narrative of momentum had been lost.

With the case of SDGR, it was a new issue that had no price memory. Therefore, sky was the limit. I had averaged down in DAO because it had moved rapidly to the downside in a fashion that usually invokes an oversold bounces. Also, it has previously enjoyed some splendid upside momentum as a Chinese burrito running higher. There is a difference between a stock pausing before heading higher and topping out. I believed correctly it was pausing.

With markets are record highs, you will find a slew of speculative names running hot. Try to chase the ones with good volume and in a sector that is favored. Take profits quickly and never hold onto something that quickly reverses lower, intra-day. Those stocks tend to continue lower the following day, which will bury you quickly with unnecessary losses.

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  1. numbersgame

    Nice summary of your process, and props for your foloow thru

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    • numbersgame

      If anyone wants to play momentum or play a bounce, FXY is your ticker

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