Tuesday, January 10, 2012

Never Chase Big Gap Opens


I normally avoid chasing any breakout plays from my watchlists or gaps when the market gaps up big on news. I normally hate chasing gap ups in a "good market" so chasing gap ups in a "suspect market" is something i try and not do. So if there are any setups that 'triggered', i will unfortunately just have to pass on them for the time being, allow them to RE-SET UP and observe the action for a couple of hours from the sidelines. I like to look for two things:

1. Is this gap holding?

and/or

2. is this gap fading?

Most importantly, are the internals favoring the Gap's direction and are stocks on watchlists holding their gains?? This is extremely important for short term direction and in determining whether to get active or not. These are also very important in determining a market's true intentions: strength or weakness.

I always urge patience when we see big gap up and big gap downs. Allow the proper intra day setup to come to you.

Good trading!



1 comment:

farmland investment said...

That makes total sense. Have chased by gaps up in double long ETFs, and these trades did not end well!

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