Biotech name has been on fire lately, pretty much every day we are seeing another biotech stock making 30,50 even over 100% run intraday. So how does a new trader catches a piece of the action? In this post i will dissect a biotech stock that we played in out chat room today. ARNA was the flavor of the day today in bio world of trading. Stock was up almost 80% intraday. Let us look at a intraday 5 minute chart to explain various ways you could have traded this stock.
1.Gap up open for stock. Often time when a stock gaps up or down, you need look for an intraday setup. The 1st set up is the open range break.
2.Run up stage. If you missed the open range break ,no real setup for entry in this stage . If you chase and buy the stock in this stage, you might make money few times but eventually you will lose money. You need a setup to enter into a trade.
3.If you miss the open range break , you want to see some pullback or consolidation. So here we have the first consolidation stage. This where you need to focus on a entry.You want see higher lows until intraday moving averages catch up. We can long this stock here around 4.72 with stop below 4.50.
4.If you missed pullback/ consolidation entry, stock kept on providing opportunity throughout the day on every pullback to the moving average and trend line. Entry on the bounce of moving average and trend line with stop below.
5.Stock made a high of 6.10. If you just hold a position from original 4.72 entry, that would have been over 29% gain with .12c risk. You could have also added multiple times to accumulate additional gains.
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