When it comes to after-hours trading, it’s only human nature to look at a stock before the closing bell and think…
“This one’s better. This one’s better…”
I would rather you have no bias.
Here’s a better way to approach after-hours trading…
“These are the big percent gainers. These are the stocks I’m watching, but I don’t know what’s going to happen.”
Why?
Once that closing bell rings…
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After-Hours Is a Different Game
You can have a play that’s spiking into the close, that gets everybody excited, but it doesn’t spike after hours.
Instead, it tanks 30%.
You can also have a play that’s fading into the close, and then it’s beautiful after hours because late day shorts get squeezed.
For example, BTC Digital Ltd. (NASDAQ: BTCT) was fading into the close on August 19.
Then it did EXACTLY what I wanted: it held VWAP and squeezed overaggressive short sellers…
Also, a lot of these plays are so volatile in normal market hours that they get halted.
You can see the gaps in the late afternoon on the chart above. It’s tough to trade with all those halts.
These plays are MUCH more interesting without the halts.
So, here’s what I’m doing…
Do’s and Don’ts for After-Hours Trading
This isn’t a comprehensive list. Instead, it’s a few things I’m noticing with after-hours plays right now.
Do Get My New After-Hours Watchlist: The Night Tape
Every trading day after the closing bell, my new tool identifies one or more stocks with potential to run in after-hours trading.
You can get the watchlist delivered to your inbox, for free, when you sign up below:
Yes, Tim! Send Me The Night Tape
PLUS: Give Me Instant Access to “The Second Session” Guide
The stocks below were all top watches on The Night Tape. Not all of them were winners (and I didn’t trade every one).
But they all have important lessons for after-hours trading…
Don’t Try to Guess Before the Closing Bell
You have no idea what’s going to happen. Xos, Inc. (NASDAQ: XOS) was a perfect example on August 18
XOS spiked big in premarket trading, then tried to reclaim VWAP all day. It was the top watch on The Night Tape that day.
But it faked me out too many times, so I didn’t trade it…
This is EXACTLY why I created my new after-hours watchlist. Because I don’t know what’s going to happen either.
The tool finds stocks with potential to make big moves after hours. If they don’t, it’s no big deal.
Don’t Buy the Dip After-Hours
For me, it’s tough to dip buy after hours.
Here’s an example…
Borealis Foods Inc. (NASDAQ: BRLS) was The Night Tape’s top watch on August 20.
There was a quick dip buy opportunity but it didn’t fit the plan, which was consolidation above VWAP and a breakout at $2.50.
There are traders who like the fade so they can get a better entry.
If you get the fade, you get the better entry, and then it starts running… shorts get scared.
It creates a beautiful short-squeeze to new highs. It’s kinda like my morning panic dip buy pattern, but after 4:00 p.m. ET
The problem is, sometimes they fade a little and then just keep fading. As you can see with BRLS, after the break out over VWAP, that’s exactly what happened.
You could have traded the VWAP reclaim and hold, but you had to be fast and it’s not what I was looking for.
So, be careful because sometimes you’re buying these big percent gainers that never bounce.
Do Be Wary of Breakouts
I prefer breakouts over the high, but then you have another problem…
What if it breaks out past the previous high, but it’s not a convincing breakout? Or it breaks out real quick and then fails? It happens…
StablecoinX Inc. (NASDAQ: USDE) was the top after-hours watch on Friday (August 21).
It spiked fast, briefly hit new highs, and double-topped.
Ideally, I want to see after-hours plays make new highs by gradually uptrending.
I like a trend to be established first, rather than just trying to catch a falling knife or a breakout.
It’s much easier to play the trend.
Key Takeaway
After-hours trading is hot right now (and I think EVERYONE should watch, learn, and trade after hours).
There is just SO much opportunity.
Do we always get “the one” that runs? No. But the more you watch the stocks we’re watching (and understand why)…
The better you’ll get at identifying opportunities as they happen.
Get The Night Tape After-Hours Watchlist Here
I’ll see you after the closing bell later today.
Cheers,
– Tim Sykes
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