I know the markets are down and the plays are choppy.
It’s also the middle of summer. You can’t expect too much (there’s definitely a seasonality to trading).
Summers are slower. Go outside.
Or, stay inside and study more.
Do whatever you can, but I would not be trading aggressively right now.
There are still plays.
But you have to be VERY meticulous.
You want potential plays and the first place to look is ALWAYS big percent gainers.
How do I find them?
I use it every single day and focus on the big percent gainers because they have the most predictable patterns.
Not that you’re going to win every time. It’s just where the odds are better in your favor.
But even then you still have to be careful.
Because there’s one thing I’ve noticed recently with these Supernovas…
Table of Contents
Watch Out For Double Tops
Lucas GC Limited (NASDAQ: LGCL) was a nice overnight play from Wednesday (July 23) to Thursday.
You can see the double top at $2.47.
I don’t care what kind of play it is, watch out for these double tops because…
Double Tops Are the #1 Indicator of a Failed Breakout
It has been the number one, most consistent indicator for when a breakout fails lately.
China Pharma Holdings, Inc. (NYSE American: CPHI) is another example…
After the big spike and halt downs, CPHI tried to bounce from $9 to $13, came back down to the $10s and then double topped.
Keep your eyes out for potential double tops (on the initial run OR later).
You don’t want to be long when it drops all the way down to the $6s, like CPHI did on Tuesday (July 21).
Another thing about these double tops is…
Stocks Can Have a “Personality”
Once a stock shows it can trade a certain way, it can do it again.
For example, CPHI did another double top in after-hours trading on the same day…
As you can see, CPHI squeezed again in after-hours trading but it couldn’t get past $16 (it tried twice).
The double top marked the beginning of the scary drop.
Again, you don’t want to be long when the stock drops that fast and then fades like CPHI did.
Notice the steep drop to the far right on that chart? That’s where the company did an offering.
All the more reason to sell into strength and beware of Supernovas that double top.
Anyone still long got absolutely CRUSHED.
Let’s look at one more example but remember…
No Two Plays Are Exactly Alike
PN Smart Energy Limited (NASDAQ: PN) was a beautiful afternoon runner on Wednesday (July 22).
When PN started spiking in after-hours, shorts got scared it was going to do what CPHI did the day before.
It was a good 30% move in two minutes.
But then it double topped. And that was the kiss of death.
The key is to recognize that no two plays are exactly alike.
Look for patterns and try to see similarities, but recognize that each play will act a little different.
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Key Takeaway
The market was down yesterday and the plays are choppy.
But if you come at it with the right mindset, there are good opportunities.
Here’s the mindset I’m trying to have…
- I’m going to ride this.
- I’m going to watch out for double tops.
- I’m going to watch out for plays that can’t get back to their highs.
- I’m going to give them time but…
- If it doesn’t get back to the highs I’ll cut it.
That’s a solid way to approach these Supernovas right now.
Cheers,
– Tim Sykes
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