This is the best & safest strategy for beginners to grow a small trading account.
But you have to follow these 2 criterias.
And ill tell you all about it, in this week’s video.
Buying the dip, or buying the bounce, or buying the morning panic, its all the same concept.
It’s one of the oldest trading setups in the book.
or DVD rather.
And it’s because, it has a high probability of success rate, if you follow certain criteria.
You cannot just buy any dip or any pull back red candle, otherwise you could accidentally
catch a rug pull and get dumped on.
And trust me, getting dumped by a stock is hella worse than getting dumped by a girlfriend
or boyfriend.
I mean, that's what I heard.
I wouldn’t know.
There are 2 different bounce set ups that I personally used when I was growing my small
account.
And ill be walking you guys through these two set ups and explaining the criteria i
look for step by step.
And all i ask, is for you to gently click that like button.
I’d really appreciate it!
The first set up, is what I call, the strong day one bounce.
Lets take a look at our first example $ELTK.
This was a known low float runner that I’ve talked about in my past video on how to trade
low float stock runners.
SO on Aug 30, ELTK opened trading with low volume, and slowly gearing up mid day.
After it broke that $5 dollar mark is when the buying volume came in.
now you don't want to be chasing that $5 whole dollar break out that many chat rooms would
be alerting. because 50% of the time these mid day break outs, turn into fake outs.
The safer way to enter as a long trader, would be to buy the first pull back.
But not just any pull back here intraday.
We always need to start on daily chart.
Which brings us to the first criteria when buying pullbacks.
The stock has to be breaking out above significant resistance on the daily chart.
Like I’ve mentioned in my last video, the daily chart can tell you a trading bias and
the important support and resistance levels you should be observing.
On the daily chart for ELTK, you can see that the last major run with high volume was back
at the end of May.
after the stock sold back down from $12.
It was consolidating around that $5 dollar level on the daily until the broke down further
down to 3.50. ad you can see that prior $5 support becomes later resistance in June.
So that's why on AUg30, that $5 resistance is an important daily supply line for ELTK
to have to break out, we have to see the buying demand to step in to outweighs the selling
supply here intraday.
that's when prior resistance truly becomes support.
Looking at this intraday chart on ELTK.
After the stock breaks through $5 mark and went to $5.90’s. this is where I would be
looking for a pull back to major daily support line around $5 to get long.
So how do we know that this important line we’ve drawn from the daily chart is going
to hold up as support for us to get long?
You do this by, tapping that like button for a chance to get a lamborghini avatador.
just kidding, I didn’t mean to give you false promises.
you actually get a lamborghini hurricane instead, hurrican?
hurricane?
The important thing to look for when buying the pull back around a major support level
on the daily chart, is volume.
which is the second criteria I look for when buying the dip on strong day 1 movers.
I want to see significant buying volume coming in around this $5 major price level from the
daily chart.
I personally use the above volume average indicator to see where there is a volume break
out.
On the three minute chart here you can see the stock after selling off from 5.90’s
, is consolidating around this 4.92 mark.
After this major exhaustion candle, in which we see a heavy selling volume from 5.36 to
4.90.
Here we see on the three minute chart the candles consolidating and holding up not selling
off any further back down to $4 where the stock had come from before in the morning.
This is when you want to see a decrease in selling volume, and increase in buying.
You can see down here, we see green volume bar slowly coming in and increasing until
it broke out above the volume average.
When you see this increasing in buying volume around major daily support line $5 area of
interest.
Thats when you know buyers are stepping in and this is the dip for you to get in.
Some people like to anticipate and just leave an order at this $5 support.
If you do that make sure to scale in slowly and not use your max size without seeing the
buying volume to confirm.
What I personally prefer more, is to get in after seeing increase in green volume bar.
That allows me yo get into the size I want with more confidence.
At the same time, I’d have a clear risk level of $5.
The potential reward, would be first the previous high of the day around $6, and then potentially
$7 and even $8.80’s.
Because those are the next levels of resistance lines, or supply zones on the daily chart.
But again, when buying the dips on strong day 1 runners.
You’ve got to have a clear risk level in mind.
If that $5 support line you’ve drawn from the daily chart fails, then this stock $ELTK
probably would have gap filled and sell off back down to $4.60’s.
But if we’re to analyze this set up from a risk reward stand point, when buying the
dip, or buying the bounce in this set up.
If you enter after volume stepping in at this 3 min candle at $5.15, you’d be risking
just under that $5, so maybe $4.90’s just below $5, for a potential of making $1 a share
to $6.
So thats a good risk reward set up.
But on the other hand, if you were to buy the breakout here at $5.70s, or later here
at $6, which is the most commonly called alert in many day trading chat rooms, you’d be
chasing up here.
Risking 30 cents or so to make 20 to 30 cents.
Thats 1 to 1 risk reward.
Not exactly a safe long set up that can help you build your account in the long run.
Now let’s go on to the second buying the dip set up that I really like, which is the
day 2 morning dip set up.
This is very similar to the day one long set up with just a difference in timing.
The day 2 morning dip set up, well, mostly happens within 30 min of the open.
Let me explain in detail wiht $LCI
$LCI was the hot stock on wall street from Aug 28 to 8/30, after the company released
better than expected earnings.
The stock basically had an inside day on 8/28 the day after earnings.
But it held the gap up from $6 to $8 technically instead of selling off, which is impressive.
So the same criteria 1 from before applies here again, you want to see a strong daily
candle breaking out on the daily chart.
So on day two, is when the day 2 long morning dip set up come in.
We can see LCI was starting to sell off below this $8 support line.
How did i get $8?
Well this was a price that held with high buying volume in day 1 intraday chart as you
can see here.
And also this line is drawn from the daily chart.
Which coincidentally, is also the day 1 close price level
So on day 2, after profit taking from previous close of 8, the stock dipped back down 7.70’s.
But the selling volume down here is extremely low in comparison to the buying volume that
stepped in right after $LCI dipped.
And you can see that the green volume bar is increasing in this consolidation range
beneath $8.
At this point, 2 things can happen here, either LCI breaks above that $8 line with high buying
volume, or the buying dies down and $LCI keeps on being held beneath this $8 ceiling and
it continues to sell off.
In which case then that becomes a day 2 short set up.
So you can see that the 2 criteria to this day 2 morning dip, above average buying volume.
Which is confirmed here on $LCI, after the stock broke above this important $8 support
previous day support line, also daily support line, also, previous day close.
That means the stock went red to green, which is an important psychological trigger for
all the longs to get in, and the shorts to cover and get out.
And as for entry, you can either get long here after seeing this wedge pattern breakout
above $8 with strong volume, or after the stock pulls back here to $8.04.
Both of these entries are valid seeing that there's strong volume to support your long
thesis around the $8 line.
And the risk for this long set up, would have to be the low of the day which is $7.80’s,
with the potential of going to previous day’s highs around $8.80s.
So you’d be risking 20 cents to make 80 cents.
Thats a good risk to reward long set up to me.
The day 1 and day 2 dip buy set up are really similiar, but the difference is that on day
2, you have day 1 support levels from the daily chart already confirmed.
Basically the support level is already defined really recently for you.
Also the day 2 bounce set up usually happens within 30 min of the open, which is why some
people call it, the morning panic long set up.
In my opinion, buying day 1 and day 2 pull backs is the best set up for beginner day
traders to build their small account up.
Most people don’t have brokers that allow them short locates so longing for the stock
is the preferred method for beginners.
And buying the dip offers the best risk reward, and gives long traders a clear price level
to risk off.
But of course, you should not just buy any bounce in any stock.
In this examples $AKTX.
You can see that on day 2 of this move on the daily, the stock basically gapped up and
sold off.
The daily support line is around 2.17.
You can see that level failed really quickly intraday and didn't bounce AKTX up.
And that’s because, theres no buying volume coming in to support this stock
By using those 2 criteria and filter out the rest, you’d be able to find high probability
bounce set ups, especially in a buyer’s market in the small cap penny stock world
that we’re in right now in August and September.
Vice versa, in a seller’s market like we saw in mid to late July when everything just
gaps up and sell off, then longing for the day 1 and day 2 pull backs is probably going
to fail more often.
This is why there is no single strategy that’ll work 100% for all the 253 trading days of
the year.
You need to be adapting to current market conditions and always be selective of your
plays.
Again, this longing the pul back, buying the dip, or morning panic, its the most common
trick taught in the book and I think its the best way to build a small account.
This strategy is suitable for part time traders who can only trade the first hour of the market
open.
Even though people teach this buying the dip everywhere, I found that not a lot of people
explained why certain support lines fail while others work.
So hopefully this video helps you guys out, and make sure to that smash that like button
and subscribe for more quality day trading videos, from the humbled trader.
Thank you guys for watching as always.
Ill see you, next week.