Buy strong stocks on down open

Discussion in 'Trading' started by silk, Sep 14, 2002.

  1. silk


    I have found that this strategy often is very reliable. Whenever futures indicate a big down open, like yesterday, identify stocks that were paticularly strong the previous day. Often these stocks will gap down with the market open and then quickly resume the previous days trend. At least for long enough to get out of them for a quick profit. Since they were very strong the previous day, there are bound to be alot of shorts trapped from the previous day who will be looking to get out the next morning.

    2 stocks that i saw this work well on yesterday was XL and ATH. Both were very strong on thursday. Each of these made excellent trades off the open.

    Anyone else use this strategy?
  2. Fading the open is a very good strategy -- and you probably can make money over 80% of the days.

    The important thing is to not get killed those days you are wrong
  3. quick way to identify yesterday's strong stocks (if you don't have a filter)?
  4. machine

  5. silk


    No quick way. Thumb through a couple hundred charts and you should be able to find some good ones. Look for ones that didn't want to go down the previous day. You want there to have been some "real" buying the day before. You want there to be shorts in weak hands.

    Putting this strategy into practice is more of an art than a science.
  6. Never particularly used the technique.....but one thing I have done for years is to watch for stocks that go down for instance on up days, and vice versa.

    This can help lead you to some of the early leaders of the next move.

    For instance, in the fall of last year following the 9/11 situation, we had rallied significantly and I started to feel a little bearish. I noticed that QCOM was going down on many of the up days.

    What a move this thing ended up having! It started down in December well ahead of the peak, and kept going down.

    Alot to be said for being observant of what's is failing to participate in either direction.

  7. nitro


    I get a bunch of these simple by trading many different pairs.

    I took home the pair CAT/DE on Thursday - I didn't want to do it, as I did not like the price action of being long CAT, but the mathematics "demanded" it.

    On Friday, I was down immediately on the open. So, I added to the pair [as many pairs traders will do.] Well, even with the spoos going sideways to up, CAT just kept getting hammered, and DE just held. I don't know what happened to me - I have seen this so many times [the action of a large seller is soooo glaringly obvious to me know I can literally smell the stink,] I knew exactly what was happening. Finally, instict took over and I said the hell with the disparity between the two, there is someone that wants out of this stock and wants out badly. So I got out [if I had access to bullets I swear to you I would have gragged on on CAT.] CAT went down almost another .50c before finding some support and coming back, but the action was so similar to the way I see spoos go up - up coil, up coil, up coil - this told me that I just needed to find that last up coil until it headed south again. Sure enough, mr large seller enters again and slams the stock down. Then, up coil, up coil, this time more ferociously - the Mr seller again and wham - stock gets hammered...

    I will be watching CAT on Monday for any gap up, and I am gonna play it LOO to sell it, even though CAT/DE is way out of line...

  8. thx all.
  9. that one of the top traders
    of generic trading looks for stocks
    like that to trade the next day ...