GENE one of the momentum stock that attempted to break out on Wednesday. It was not a successful breakout as the stock was faded later in the day and it closed back in the range.
Since break out was not successful , it is safe to assume there will be many trader that will initiate a short trade with stop lose above Wednesday’s high. So our game plan was if the stock takes out Wednesday’s high, it will create a short squeeze as the shorts covers and momentum crowd will chase long. Friday stock finally broke out and we had a nice profitable trade in this in our chat room.
Let us look at a intraday 5 minute chart to explain how we traded this stock.
1.Wednesday late day weakness in stock causing shorts to piled in on failed breakout assumptions. Most will have a stop on Wednesday high.
2.Friday stock opened with small gap up and moved fast enough to trigger stop losses on the shorts.
3.Now that the stock finally in breakout mode First pullback /consolidation provided fresh entry for momentum traders as we bought the stock 5.33.
4.Stock continued to create flag after flag providing us more opportunity to add into our position.
Stock made a high of 7.68, that is over 44% gain from our 5.33 entry!
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