Today we hit $GRPN for a 4.25% gain. There are two types of Red to Green plays:
1. Major momentum stocks from the day before that wash out in the morning and then move red to green. (e.g https://bullsonwallstreet.com/invn-how-to-trade-red-to-green-moves/)
2. Stocks that have been beaten down and are now coming off a bottom. (e.g $GRPN)
There were a few reasons the Groupon trade was perfect today. First, the daily chart was beautiful. The stock had finally broken over and closed above the 50 DMA, which was something it had not done for quite a long time. The 50 DMA was an obvious area of resistance for this stock and the fact that it broke that on Friday and closed over that mark was big. The second thing about Groupon that stood out was the expanding volume in the stock. The stock had increasing buy volume for three days. The third thing that stood out is what I want to focus on, and that is that the morning dip in the stock was bought.
As with all Red to Green plays, we look for a morning washout in the stock to help us determine if this stock has the potential for a second day run. If the dip in the morning gets bought then that’s our cue that this thing just might make another run. First thing this morning, Groupon dipped down to the low $5’s. After closing strong on Friday, this is just what we wanted to see. Now we were just watching to see if the dip was going to get bought or if the stock was just going to fade all day after dipping. Kunal bought the stock at $5.18 after seeing dip buyers eat up the stock near $5. He was in a sense anticipating the red to green move in the stock. The stock was steady up all day after that, and even after moving red to green on the day. He took profits as the stock moved up. A perfect trade and a perfect example of the “other” type of red to green move in our arsenal.
Learn more by emailing me at maribeth@bullson.ws
