Wednesday, July 16, 2008

Over Night Holds (ONH) Explained

One of my favorite trades are Over Night Holds(ONH). Sounds like a swing trade but it's NOT! It's more like a momentum(MOMO) play. I am looking to stocks that follow thru the following day. If I short Over Night I am looking for a Gap Down and if long Over Night i am hoping for a GAP UP the next day. I am very very picky and only demand THE BEST POSSIBLE TRADE i can find, if i don't find anything, then i will DO NOTHING.

Things To Look For:

1. NEVER hold overnight a stock that reports earnings after the close or in the morning. Be AWARE of earnings and avoid them like the plague.

2. Always be on the look out for hot sectors, short squeezes, highly shorted stocks & momo stocks.

3. HIGH OF DAY (HOD) and LOW OF DAY (LOD) closes. I literally wanna see the stock close on it's HIGHEST tick of the day for long positions and LOWEST tick of the day for short positions.

4. VOLUME, VOLUME, VOLUME! I wanna see volume and lot's of it. Smart money is always most active near the close and if you see heavy volume going into the close, that should tell you something. It ain't mom and pop shuffling shares around. It's THE BIG GUYS squaring off their positions.

5. Always Trade in the path of least resistance of the market. If the market closes on it's lows on strong volume, then you want to take Short Over Night Hold(ONH) Candidates, not long positions (for this strategy)!

6. DISCIPLINE!!! To take a loss if there is one if the stock doesn't do what you expected! GET OUT! Have faith in yourself!

7. You wanna BUY/SHORT right before the close after you are confident you have made the right decision and you have found a winner.

That's it. It's sounds simple and you'll find out it's easier said then done. hahaha! Just needs a little practice and eye training.

Here's my results for Over Night Holds For the MONTH of MAY and JUNE: These results reflect if my real Over Night Results If i held for 30 minutes after the open the next day after initiating an Over Night Hold.

May O.N.H./30 Min. June O.N.H./30 Min.

1-May 3000

2-May 2200 2-Jun 3500
3-May Weekend 3-Jun 800
4-May Weekend 4-Jun -1500
5-May 2200 5-Jun 2600
6-May -1500 6-Jun 500
7-May -3000 7-Jun Weekend
8-May 0 8-Jun Weekend
9-May 0 9-Jun
10-May Weekend 10-Jun -500
11-May Weekend 11-Jun 2000
12-May -1500 12-Jun 0
13-May 1000 13-Jun -1000
14-May 2200 14-Jun Weekend
15-May 0 15-Jun Weekend
16-May 3000 16-Jun 3000
17-May Weekend 17-Jun 5000
18-May Weekend 18-Jun 2900
19-May 0 19-Jun -3000
20-May 0 20-Jun -800
21-May 7200 21-Jun Weekend
22-May 0 22-Jun Weekend
23-May 9000 23-Jun 500
24-May Weekend 24-Jun 1000
25-May Weekend 25-Jun 0
26-May Weekend 26-Jun 3750
27-May -3500 27-Jun 0
28-Jun Weekend
29-May -1500 29-Jun Weekend
30-Jun 4200

TOTAL 18800 TOTAL 22950

As you can see this strategy works but you need to know what to look for, you are not gonna get them right all the time but the results speak for themselves and you have to practice and learn what to look for. This strategy is just ALL trading strategies, it requires THE DISCIPLINE TO SELL if you DO NOT GET THE GAP. If the stock doesn't do what you expected, then get OUT immediately. Take the loss if there is one and have faith in yourself to spot a winner on your next trade. DISCIPLINE!!!!!!!!!

A Picture is worth a thousand words: Look at the charts above and train your eyes to spot this pattern and behavior going into the close.

Check Out the Charts ABOVE: I put two charts for each stock. First chart shows what the stock looks like on the 5 min. charts and the second chart shows what the stock looks like on the daily chart when it first caught my eye for an ONH candidate.

Hope this helps you in your trading.

and remember, you make your own trading decisions.

Trade Smart!


Bluedog said...

Thanks for taking the time to put this together, Stewie. So if you don't get a next day gap, you sell immediately? Also, if it gaps up, so you sell right away or hold looking for follow through?


anarco said...

Crystal clear!
I was looking at BAC last night and that met the criteria. The problem was that WFC reported earning and the whole financial sector gapped up today (and the market was due for a bit of a bounce). So my first personal lesson in this area is to also ALWAYS look at the overall market condition. Thank you Stewie! I am looking forward to incorporating this one into my trading strategies.

Anonymous said...

Thanks for sharing the wealth Stewie. Does MSFT qualify for ONH setup? They report earnings tomorow and it looks like the smart money has been accumulating in the past 2 days...


Stewie said...

BD> i have been trading this strategy for a long time so i usually use a little more gut feel to it. But the strongest moves/stocks usually follow thru the next day. so imo, if the stock doesn't do what you expected it best to just get out with a small loss and keep a clear head for the next setup if there is one. if it does gap up, then i will generally baby sit the position and get out at my discretion. i have found that holding for 30 min and then selling, gets me the best results.

Stewie said...

ANARCO. look at MA. I took a small ONH position in it today. Also, look at CAL.

Stewie said...

Hi PN, yes, msft would fit into this category, only problem is earnings are coming out and MSFT deson't fir my criteria of a highly shorted stock or a momo stock. it's a slow mover. there's more action elsewhere but the pattern looks right just the wrong stock. that's where this strategy gets a little tricky, you have d a little home work and know where the possible short squeezes are gonna be most advantageous.

Anonymous said...

So how are you identifying candidates that fit this criteria other than looking at a whole lot of charts w/ just a few minutes left? Are you running a large set of charts on screen or doing some sort of scan to narrow down candidates?

Anonymous said...

Great post stewei,really good. Could you write sth on position size on this kind of trade,supposing one has a 100000$ a/c what should be an approximate position size for this kind of trade in your opinion?
In general I would like to see an article on your take on money management.
Thank you for taking the time to explain these trades.

Stewie said...

pam. i cannot give you advise on money mgemt. what works for me will surely be different for you. my risk tolerance is differnt than yours. i am a discretionary trader. i do not have set rules that i follow other then DO NOT TAKE BIG LOSSES.

B-rad: i am sure there are scans that can pick up HOD or volume gainers etc. but i use the scanners that god gave me, my eyes. i only follow 30 stocks on a regular basis.

Bluedog said...

Thanks for the feedback on the earlier question Stewie. Good luck on MA. Looks like a great setup.

HPT said...

Great post Stewie, will have to link it.

Romeo Bravo said...

Stewie, does the market have to be strongl trending up or down at end of day for you to put the position on?

Stewie said...

when the mrkt is strong/weak. it reinforces my conviction. but i dont need to see that.

Anonymous said...

Thanks for this informative info, Stewie. Sometimes the most simple methods are the most powerful.


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