The Red to Green play is one of our go-to setups and a very easy way to make quick money. You want to wait and let this setup confirm before you enter. The characteristics of a Red to Green move are:
1. Major momentum stock from the day before
2. Morning washout (meaning the stock opens red or goes red fairly quickly when the market opens)
3. Buy when the stock moves green for the first time that day
Earnings plays or news related stocks usually make for the best R/G moves. When you see a chart that looks like $CBMX – a huge pump stock that closed well the night before – you automatically start thinking R/G move for the next day. It’s impossible to hold shares of this stock overnight because the stock ran from $2 – $9 in one day! You could possibly wake up to a huge loss the next morning! So instead of doing that, you put the stock on your watch list and have it ready for trading the next day. The buy on this stock occurred the minute the stock went green.
As you can see, the stock closed at $8.6 on Friday, so that’s the mark you are eyeing for the Red to Green move. As soon as the stock goes green on the day, that’s your mark. The second entry on stocks like this often comes when the stock breaks the highs from the day before. So if you miss the initial R/G move, then you can watch and try to buy the second entry, which is what we did. Remember, R/G moves are very fast, so you immediately begin to scale out as the stock pops.
Here’s the intraday and daily look after the stock popped red to green. Our entry came at $9.5, as the stock was breaking the previous day’s high. We quickly sold off shares into the pop at $10.17. These plays can be really powerful; as you can see, the stock ran to $14 after the breakout.
I can help you learn to trade this setup like a pro – email me at maribeth@bullson.ws
