I received an email from a member over the weekend asking a very good question regarding missed entry points.
I’ve been in the trading room for the past couple of weeks not mimicking trades simply trying to analyze why Kunal will take certain trades. I have a question on two different plays. If you check out the attached pics you will see YELP and PRAN intraday charts from today. I understand why Kunal would take PRAN but some days you see stocks just take off in the morning and never come back like YELP. Is there any signal for you to go into a chart like this or do you only trades setups you like instead of chasing a couple of points?
Typically, if a stock blasts through your entry point first thing in the morning, it will continue to be strong all day. If you are in the chat room, you will notice that even when this happens, Kunal is still watching the stock closely. Even if you miss your initial entry due to a morning spike, you should still have the stock on your radar and watch for another intraday setup, even if it is a bit higher. The reason being that the stock now has major momentum because it broke critical levels and will most likely run higher for a period of time.
From the above question, take a look at the chart of $PRAN. The stock blew through the $4.90 – $5.00 entry point pretty quickly in the morning. By analyzing the daily chart below of $PRAN, you will see the reason WHY we were watching the stock (the stock pulled back big for 2 days after a huge run up and thus was on our radar for a snap back). We were, therefore, watching for any type of strength in the stock to signal a buy for us long. When we saw the buyers step in so quickly first thing in the morning, that was our cue and we knew that today was the day to be in the stock. We didn’t chase the morning spike, but instead waited for it to flag intraday and give us another entry point around the $5.00 level. We ended up selling this trade off around $5.50 for a very nice gain.
1. Prepare the night before. Know which stocks have potentially powerful setups and set your alerts for the specific levels you are watching
2. If you miss your entry point, don’t freak out. Oftentimes, morning strength is a strong sign that the stock is indeed buy-able. Be patient and watch intraday for a second entry point.