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How a Pro Trades Gap Openings
01/01/2013 8:00 am EST
The Technical Trader's Harry Boxer explains why he watches the pullback after gap openings to find good trading opportunities and why he keeps an eye on volume.
My guest today is Harry Boxer, and we’re talking about how he finds good opportunities intraday. So, Harry, talk about some of the things you look at to find good intraday trades?
Well, you know, I think pre-market prep is important. I spend about an hour before the market opens going through all the pre-market activity. If you go to NASDAQ.com, or any of the other major web sites for the exchanges, they’ll show you what stocks are moving, how many shares are traded, and then you can get an idea also, obviously, checking the news that may be related to that move, and if it’s a powerful enough move, I’m usually interested, because I think a lot of times when they gap up, the first reaction is that people take profits then they back off.
What I want to see is that first pullback, and if it’s what I would call a gentler organized or nice constructed pullback, and then if it starts to move and the buying picks up. And the other thing is when it pulls back, you want it to be on low buying. So, if all of a sudden it jumps, pulls back in a nice consolidation pattern, a wedge, a pennant, you know, flags up like that, and then it blows through that, that’s usually when they indicate to me that they may be trending today, so we often in our Web site we’ll recommend those stocks for day trades.
So, do you like it to get through the previous high that it just did when it gapped up before you buy into it?
Not necessarily, because if that first initial thrust comes with big volume, for me it’s always a risk if you don’t wait for the takeout, but the way to protect yourself is to stop it under the bottom of that first move, and so oft times we may be stopped that quickly but for very small losses, but if they work they could be up 50% to 100% a day sometimes.
How many trades do you put on at any given time that are like this?
During the day?
During the day.
Anywhere between a half-dozen and a dozen trades. I would give them, my subscribers, buy alerts, and let them know that this should be considered for a trade.
Alright, and then are you definitely closing them out by the end of the day, or how long do they usually last?
Well, what we do is during the course of the day I conduct live Webinars where I show them the pattern and how it’s developing during the course of the session, and whether or not it’s continuing to be bullish, and it may set up another pattern, another consolidation. A lot of times they stir stuff up nicely, and they may be moving up in a 45-degree angle channel, and so we’ll monitor those to make sure that they’re continuing in a bullish manner, but usually by the end of the day, it’s amazing how often I get a question, “Should I hold this overnight?”, and I say, “That’s up to you, because we’re day traders in this room. If you want to hold it overnight, that’s on you. If it gaps down tomorrow, don’t call me up.”
So, you shouldn’t hold an overnight just because it’s a loss or something like that. There should be other reasons to hold it overnight.
Oh, right, no. Most of the times if it’s a loss, definitely take the loss, because the next day it could gap down.
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