The Good ‘Ole Potentially Hot Sector Friday Squeeze, Monday Gap Pattern
Posted by Timothy Sykes on Mon 14th of Jan, 2008 10:31:55 AM
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If you read my post on my 5 favorite agri plays, you’d know that going into Monday, I was bullish on COIN, SEED and TITN. Was I long any of them—no, that’s a whole different story (discipline problems) and irrelevant to the point I’m trying to make here (because if I were a truly great trader, I’d keep this all to myself and you might or might never learn about this stuff), which is that Monday’s gap ups were PREDICTABLE. The reason being the smallcap hype game (for all my mistakes, this is one of the patterns most responsible for me becoming a millionaire at 22 years old, as outlined in my dvd)
For the record, TITN gapped $1.50, SEED and COIN 50 cents each. The first thing you need to do is forget about how these stocks finish today, everything after 9:45am isn’t predictable because there’s a whole new set of variables at work that weren’t there Friday afternoon (I’ll recap today’s action in my daily roundup later today). Going into Friday’s close, all 3 of these stocks had nice runups, broke intraday and weekly highs. In short they were perfect short squeeze candidates, and experienced traders went long—no matter valuation, no matter that the market might tank today, this is pure hype and many people knew the hype machine would work overtime over the weekend. And it did.
My post was spammed on dozens of message boards (thanks for the hits!) and whether the message board posters agreed with the bullish sentiment or not, these stocks were now on their watchlists. And, that’s the beauty of the smallcap hype game, all it takes is to get people watching the stocks because just as boiler rooms know a few people are going to give into temptation, so it works with traders and investors watching stocks move higher without them.
There’s very few patterns that are as reliable as a hot sector Friday afternoon squeeze/Monday gap higher—usually these stocks even become good shorts after the pattern has played out since this pattern creates ridiculous moves (from 3:30pm Friday to $9:45am Monday COIN went from $8 to $9.50, SEED from $10 to $11.50 and TITN from $16 to $18.50), but as I and others learned the hard way, that’s not as reliable a pattern. Now, these sound like nice and easy gains, but until a stock breaks out, you don’t know if it will or not—there are many fakeout breakouts—so the ideal entries would be when these potential Friday afternoon squeezers break their intraday highs, COIN at $8.20, SEED at $10.50 and TITN at $16.50, still leaving a profit of $1.30/share for COIN, $1/share for SEED and $2/share for TITN.
Just know your executions will worsen the bigger a position you have, so the ideal position size for these plays is anything under 3,000 shares, hence the limited scalability of this strategy/pattern, buuuuuut if you have a $50,000 account and you allocate 1,000 shares for COIN, 1,000 for SEED and 500 for TITN (approx $30,000 total), you should be making a cool $3,000, or 10% on your money just for holding over the weekend, maybe 5-7% if you stink at timing and execution like me.
(I know it’s easy to look back in hindsight—especially considering I only made a few hundred (like a big Jewish baby, I sold out before sundown on Friday)—but just remember this example in the future as there will be THOUSANDS of plays EXACTLY like this).
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View All| Date | Stock | Buy | Sell | Net |
|---|---|---|---|---|
| Nov 6 | QXM | $4.31 | $4.80 | $1936 |
| Nov 4 | COT | $8.66 | $8.88 | $642 |
| Nov 4 | QXM | $4.61 | $4.89 | $822 |
| Oct 30 | DDRX | $25.70 | $26.53 | $812 |
| Oct 29 | CTDC | $4.00 | $4.42 | $781 |
| Oct 26 | AWSL | $3.24 | $4.10 | $2516 |
| Oct 23 | RODM | $5.27 | $5.23 | $301 |
| Oct 22 | AMLM | $2.69 | $2.97 | $820 |
| Oct 22 | USEG | $6.12 | $6.09 | $85 |
| Oct 20 | CBOU | $8.93 | $9.06 | $243 |
| Oct 16 | VRMLQ | $16.79 | $18.65 | $2773 |
| Oct 13 | YONG | $11.05 | $11.66 | $1202 |
| Oct 13 | NPHC | $0.59 | $0.71 | $583 |
| Oct 12 | IMGG | $0.60 | $0.70 | $682 |
| Oct 9 | ZAGG | $5.50 | $6.10 | $2380 |
| Oct 7 | GVBP | $0.03 | $0.27 | $702 |
| Oct 1 | NPHC | $0.70 | $0.85 | $1482 |
Total: $92,304 (644%)
