If you have been trading stocks the past few months, you have probably noticed that small caps have been going crazy. Almost every week, there is at least one (sometimes more) small-cap stock that goes up 100% or more within 1 trading day. A common catalyst of the stocks making these insane moves is a blockchain or cryptocurrency-related catalyst. Small caps are especially volatile and with this type of catalyst, these stocks will have some amazing range to trade around. So what are some characteristics of these small-cap stocks that go up hundreds of percent on a blockchain catalyst and how should you trade them?
Key Characteristics Of Explosive Blockchain Stocks
NETE, WATT, NXTD, and CNET (to name just some of the recent runners) were all low float stocks. A low float is defined as any stock with a float under 100 million shares. However these stocks all had exceptionally low floats, with all of them under 20 million shares. When you combine a low float stock with a blockchain stock, you have the ingredients for a perfect storm. Check out this video for information about low float small-cap stocks and how to trade them.
Clean Daily Chart
Before you trade any stock, you should study the daily chart thoroughly before putting any capital on the line. You need to know all the key resistance and support levels before you trade a stock and figure out if there's enough room on the daily chart to make a high probability trade with good risk reward. The stocks mentioned above all had daily chart breakouts with no resistance levels above them.
History Of Making Big Moves
If a stock has run 100% before, it might do it again if it has a breakout gap. You want to study the daily chart of a stock and see if the stock has ran big before, and if it has followed through. You don't want to be trading stocks that have a history of gapping up and then fading all day (unless you're looking to short). If you get an intraday setup on a former runner, and combine this with a blockchain catalyst, there is a high probability it will explode again.
How To Trade Small Caps
Scale Out Into Strength
These stocks are so volatile that you can take 1000 shares of these stocks and be up 500 unrealized in under a minute during the first 30 minutes of the trading day. This also means that you can also be down that much in a short period of time if you don't have good risk management or know how to time your entries. This why when you're trading volitlie stocks like these you should scale out into strength.
Add To Your Winners
These small cap stocks will often give multiple setups throughout the day when they're running. If you have some cushion on your position and you see another setup forming, you can put on some more risk or move your stop higher to ensure you get a green trade. These stocks tend to run much further than you'd expect. If you are looking to maximize your gains on these blockchain stocks you cannot be afraid to get aggressive and add to your winners.
60 Day Trading Bootcamp Starts January 9th
We teach our students how to trade these type of plays in our 60 day bootcamp. Our next one starts January 9th. We will help you learn how to trade from A-Z and put together your very own trading plan so you can go out and take advantage of plays like this. To claim your seat for our next start date please email Maribeth@bullson.ws.