hey traders thanks for checking out this video my name is Travis from master the market and this
video is going to be talking about the morning flush trading strategy which is a day trading
strategy that looks for stocks gapping up in free market and then taking advantage of them by buying
into their morning sell-off or in other words their morning flush before they start to recover
and before they break out to new highs during the rest of the day so let's go ahead and get right
into this and i wanted to first start off with an example of what this morning flush strategy
is looking for uh this gray section here on the left side of the chart is the pre-market hours
and then once the background goes to black that's when the market opens for the day
so we can see here in this pre-market section that there is a stock gapping up um it's moving
up significantly from its previous day close most likely because there was some kind of catalyst or
press release that was put out by the company but when it comes to this morning flush trading
strategy what we want to see is that these stocks gapping up have a sell-off at the market open
which is exactly what we see here as life sells off from about 650 down to the 580 area
following that sell-off and following that morning flush we see that it starts to kind of curl back
up the stock begins to recover it actually ends up breaking out above the opening high
as well as the pre-market high and then it ends up running on throughout the rest of the day
so really the whole idea of this strategy is to look for these stocks gapping up
wait for them to form a bottom when they sell off at the market open
and then look to buy into them to actually capture this portion of the move
once they start to break out and once they start to run okay so now i want to talk about how you
can actually find stocks that are going to kind of fit into this morning flush trading strategy
and the first step pretty obviously is going to be to find stocks that are gapping up
in free market now to do this you can either use some kind of scanner or some kind of screener
and just look for stocks that are up significantly from their previous day's close or alternatively
you can use the morning watch list that i post on my twitter as well as my website every single day
i'm going to have my twitter link down below in the description and in just a moment i'm going to
show you exactly what these morning watch lists look like but the other thing that you want to
look for is ideally the best morning flush setups are going to tend to have very strong volume so
these stocks that are trading 5 million 10 million even 20 million or more shares during pre-market
alone those tend to be the stocks that have the best potential to end up becoming all-day runners
after they have their morning flush at the open okay now very quickly uh just to show you what i
mean by the morning watch list this is something again that i post on my twitter every single day
as well as update on my website master the market but if you don't currently use some
kind of scanner or some kind of screener this can be a great tool for you to find these stocks that
are gapping up in free market to actually look to take advantage of this morning flush strategy
you can see that i have some stocks gapping up as well as stocks gapping down and i'm going
to share the news headlines or the catalyst for the move as well as some levels of support some
levels of resistance and the number of shares outstanding for that stock okay but anyway with
that being said that's going to be the first step simply to find these stocks that are gapping up
in pre-market the next thing that you want to do is going to be to check for the catalyst
now most of the time when it comes to these stocks gapping up they're going to have some kind of news
or some kind of catalyst um and that's going to be the thing that is actually driving the stock to
the upside in the first place but with that being said not all catalysts are going to be the same
some of them are going to be much weaker catalysts that simply get an overreaction from the market
and then there's going to be those strong catalysts that are actually very good pieces
of news and of course those are going to be the pieces of news or the catalyst that we want to
look for because they're going to give the stock greater potential to become an all-day runner okay
so with that being said i wanted to just list a few pretty strong catalysts that i see a lot
of times get a strong reaction from the market and the first of those is going to be any kind
of fda approval these are mostly going to be of course with biotech stocks and biotech companies
if they have some kind of drug or some kind of treatment that they've been testing and doing
trials on and then they get some kind of fda approval for that drug or for that treatment
that's a pretty strong piece of news and generally the market is going to have a very strong bullish
reaction to that type of news so these are going to be the catalyst that we like to see when we're
looking to buy into a morning flush another one is going to be any kind of positive trial results
positive trial results from some kind of drug or some kind of treatment can really be a great step
towards fda approval in the future so this is another one that tends to have a really
strong bullish reaction from the market and also something that we want to look for when we're
looking for these morning flush setups and then another example is going to be an earnings beat
and that could be a quarterly or it can be an annual earnings beat but if a company puts
out their earnings and has very strong earnings compared to the expectations or compared to their
previous quarter or previous year that shows that the company is growing and is getting financially
and fundamentally stronger which is always a good sign for a bullish reaction in the market as well
okay so now that you've found these stocks that are gapping up and you've narrowed them down to
the ones that have the strongest catalysts the next step is going to be to actually draw lines
and what i mean by this is simply go ahead and look at the charts do some very basic
technical analysis draw on the charts any lines of support any lines of resistance
and even any trend lines that you see because these are often going to be the levels where
the morning flush ends before the run to the upside begins okay so very quickly i just
wanted to show how effective it can be to draw these lines on your charts when you find these
stocks that are gapping up in the morning um an example today is the stock lptx on the left
side over here we have the daily chart and on the right side over here we have the five minute chart
and what i like to do when i'm drawing lines of support in lines of resistance is first i'm going
to look at the shorter term time frames and i'm going to look at the pre-market price action and
see if there's any significant levels of support or any significant levels of resistance that
actually formed during that pre-market session and right off the bat i'm just going to mark the high
up here at about 317 as a level of resistance um i can also see that down here at about 220 the stock
kind of consolidates above that price level for a while and that's also a level of past resistance
so i'm going to go ahead and draw some support at 220 and the next step that i would do is go
over to the longer term time frames like the daily and sometimes even the weekly charts and look for
any significant levels of support or resistance in that area as well and we can see that right
here at about 280 or 285 there was a level of resistance in the past and then we can also see up
here at about 324 because that was a previous high that's going to be a level of resistance as well
so now you have these key levels drawn on your chart and what you would do is simply wait for
that morning flush to happen ideally it's going to happen down to a level of support
that level of support is going to continue to hold and then you can buy in and use that support level
as a risk level so that way if the stock doesn't end up bouncing back up and recovering you can
cut losses below that support level and never have to worry about taking a large loss on these setups
all right but anyway the next step after having these lines on your chart is going to be to buy
the reversal in these stocks so in other words you want to wait for some kind of sign of a reversal
from the morning flush before you actually buy the stock you may have heard the saying before
to not try to catch the falling knife in the stock market and that simply means that you don't want
to buy into a stock that is actively falling to the downside and that same concept is going
to apply to the morning flush strategy as well even though we're looking for these stocks that
are selling off we want to wait for them to form a bottom and show us some kind of sign of a reversal
before we actually buy into them so that reversal can be the charge starting to curl to the upside
it can be new levels of support starting to form we may see that the bids on the level two are
starting to increase and so on and so forth but whatever it may be looking for a reversal sign is
going to be a key part of taking advantage of these morning flush setups and the nice thing
about waiting for these lows to form and waiting for a reversal to actually start to happen before
you buy in is now at this point you're already going to have a low that is formed in the stock
and you can use that low now as a risk level to cut losses if the trade happens to go against you
and this example that we see on the screen here is a really good example of that because
we see that at the market open there was a big morning flush which of course is exactly
what we're looking for and once it forms this low down here at about 13.70 and it starts to
kind of bounce back up we now see that that low is going to naturally become a level of support
so if you decide to buy into this morning flush setup in this area you know 1450 even up to 15
per share you can still use that 1370 area down here as a risk level to cut losses in
case this happens to be kind of just a quick bounce before it continues lower
so of course that's a much better way to go about trading this strategy rather than kind of blindly
buying into the stock as it's flushing and as it's selling off you know maybe at 16 at fifty even at
fifteen dollars before it's ever even set in a low and before it ever started to form any levels of
support or even show any signs of reversing to the upside okay so anyway that is the morning
flush strategy that's the basic idea behind the strategy find stocks gapping up with a strong
piece of news and strong volume wait for them to have a sell-off or a flush at the market open
and then look to buy into them after that flush is ending once they start to show signs of a reversal
so that way you can profit from them starting to recover and break out to new highs later in the
day hopefully you found this strategy helpful and hopefully you enjoyed this video if you did please
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my website master the market which is going to be linked down below in the description but anyway
thank you again for watching i hope you enjoyed and until next video good luck with your trading
you