When scalping a stock you usually look for stocks that look like they are setting up to run or buying the dip during the run. There are some key things that you want to keep in mind and $IQNT showed me them today. 1st you have a better chance of success during a bullish day where the market is green. This factor already increases your chances of coming out of a trade with a gain vs a loss. To do this pre-market look at a list of all the sectors and see if most of them are green. This is an indication that the market will be bullish for the day. Continue to keep an eye on them throughout the trading day.
Now when looking at your exact stock ask yourself if this stock is in an uptrend or a downtrend? By picking out stocks that are already in an uptrend increases your chances for success. By looking at the health of the market first and then the health of the stock that you are looking to trade will make it more likely that the stock will go into your favor. If you buy a stock that is in a downtrend and the market is bearish for the day you can see how you have just greatly lessened the chance of your success.
Here are a few things that I noticed with $IQNT:
1st the market was bullish on the day which was shown by looking at the overall market. 2nd the high of the 1st 5 minute candle was $2.97. If this stock was going to start an uptrend and go in the direction of the overall market it would first have to break $2.97 where the first line is drawn.
As you can see by the image below it broke the that 1st 5 minute candle of $2.97 which showed that this stock had the potential to go the way of the market and start an uptrend. If you missed that $2.97 was there a 2nd entry?
Yes, one of the 1st things you should have noticed is that right after $2.97 was $3.00. This could act as a big mental resistance for traders. You could have bought the $2.97 break but then hit resistance right at $3.00 for only a .03 cent gain. Since I missed $2.97 I chose to buy the $3.00 break when time and sales showed a great deal of buys going through at $3.00 which showed it would most likely break. And break it did! By buying there you got to enjoy massive gains within 5 minutes! Remember though, when they go up that fast they usually tend to come back down just as fast which was the case today.
These types of trades can be very profitable but to put the odds more in your favor you want to play these breakout types on a bullish market day. If you are buying these breaks it is also common at times to use a market order for NASDAQ as they can go 2-4 cents within seconds before you can adjust your order.
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