Premarket and After-Hours Trading
Low-Priced Runners
Just about every morning and evening, before and after regular trading hours, we will see certain stock making insanely irrational price moves. We will see huge spikes in volatility and price.
Sometimes, these moves have a good reason behind them. Like an insider buy, quarterly earnings release, or market moving news headlines. Sometimes, they appear to move for no good reason at all, like a pump and dump scheme.
The biggest moves usually happen with low-priced penny stocks. I call them the "low-priced runners." The first thing I want to say about runners is to be very careful with them.
If you are a new trader, then I recommend staying away from them as they are very risky. But sometimes you can get very lucky with a runner and make massive profits in just a few short minutes. So, I will go over a few things that I look for in a runner that I believe make it a good candidate.
I have a group that is dedicated to following the low-priced running tickers. Scan the QR code or send me a request to join the group.
Market Moving Catalyst
If I wanted to participate in a rally that is happening in premarket or after hours, then the first and most important thing I would look for is the catalyst that caused the price move.
A market moving catalyst can be anything. Like quarterly earnings releases, insider buys, analyst upgrades or downgrades, warrant exercises, share offerings, FDA news, patent news, management changes, mergers or buyouts, new product releases, etc.
Sometimes, a proper catalyst can lift up an entire sector or industry. Other times, a single stock will feel the effects of the catalysts.
I must see a reason for a big price move, or I won't touch the ticker. So, a proper catalyst is the most important thing to look for when trading the low-priced runners.
Market Mechanisms
There are a few things that I look for that help me in deciding which runner to choose. Sometimes, these tickers will skyrocket only to crash back down as soon as you buy in. It happens all of the time.
Often, it seems like the skeemy market is just waiting for enough liquidity to enter before it takes all of our hard earned money away. Here are a few variables that can reduce the probability of this happening.
Large Volume
There must be a large volume of traders trading the ticker. I need to see a lot of investors piling in to provide the upward momentum. By a lot, I mean millions. Also, the more buyers we see, then the more probability that there will be buyers on any dip to keep the price from crashing back down so much. Lastly, more volume leads to more liquidity. This gives you a tighter bid/ask spread and better entry and exit prices. This decreases slippage.
Low Float
The share float is the amount of shares that are available for purchase. Once the shares run out, then the market is at the whim of all of the traders who are trading the ticker at that time.
Without a float of shares for the market makers, they can't dictate the price action by offering shares at whatever price that they want. If traders are caught up in the euphoria of the premarket or after-hours rally, then they are likely to bid the price up higher and higher, and the market makers can't do anything about it. That is until there is another share offering.
Short Interest
A short squeeze occurs when upward price momentum causes investors to exit their short positions, which pushes the price up further.
When a ticker has a high short interest, then there are a lot of investors who are short on the company. If a runner moves up too fast or above a certain point, then investors will often exit their short positions. Occasionally, they will receive a margin call, which will close the position out automatically.
Some people don't like the term "short squeeze." Whatever you want to call it, these are the factors that often contribute to the upward momentum of a low-priced runner.
Share Offerings
Some things to watch out for when trading low-priced runners are additional share offerings. Share offering dilute the value of shares already held by shareholders. When a company offers new shares to the market, it will move the price of all shares on the market. Usually, but not always, the price will almost instantly move to the price that the company is offering the new shares.
Often, you will see a company offer new shares to the open market after the share price has experienced a substantial run-up. They do this simply to raise money for the company. If the company is still in the pregrowth stage, like many of these tickers that run up in premarket or after hours, then I would expect an offering to happen soon after any substantial rally. After all, this is the perfect opportunity to capitalize on the high share price and fund the companies growth or debt.
Sometimes, you will see a company offer shares at a higher price than the listed price of shares already traded on the open market. But probably 95% of the time, they will offer the shares at a discounted price. This will bring the listed price down of all company shares.
Because of the consistent share offerings that follow a massive run-up in price, I always recommend taking a little profit from time to time during the rally. This will secure some profit within your portfolio and prevent you from losing your entire investment thanks to a share offering from some indebted company.
Here is an example of the selloffs that can occur after a company announces a share offering.
Don't Trade a Barcoding Company
A quick way to guage if a ticker is a good candidate for a potential runner is by looking at the chart. If a chart looks like a barcode, then stay away from it. Barcoding is a symptom of low liquidity. And that is not good for any potential upside momentum. A barcoding stock can always make you some profit. But the probabilities that it will become a low-priced runner are slim to none.
Don't Get in Too Late
I try to avoid getting into a ticker that has already run up too much. Always remember that when the volatility is high, like it almost always is with a runner, then bigger rips lead to bigger dips. After a big run up, the selling that follows can be substantial.
For example, after a stock jumps up 150% in premarket, then a 20% drop is easy. It is just a fraction of the massive run-up. Not to say that the runner can't jump up another 50% after the 20% drop. But it would be a very stressful hold if you bought in right before the selloff.
With a low-priced runner like we have been talking about, you want to get in early or wait for a substantial dip. Always remember that runners make big moves to the upside AND to the downside. So be careful.
I hope some of this info helps you make more informed investment decisions when trading the stocks that make crazy moves in after hours and premarket.
So, do any of you Moo'ers out there trade the low-priced runners?
Good Luck Trading
As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you can't afford to lose. Give some of your investments time and know when to cut your losses.
Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.
$SPDR S&P 500 ETF(SPY.US$ $SPDR Dow Jones Industrial Average Trust(DIA.US$ $Invesco QQQ Trust(QQQ.US$ $S&P/ASX 200(.XJO.AU$ $S&P/ASX 100(.XTO.AU$ $FTSE Malaysia Index(.KLSE.MY$ $FTSE Singapore Straits Time Index(.STI.SG$ $FTSE Straits All-Share Index(.FSTAS.SG$ $Nikkei 225(.N225.JP$ $TOPIX(.TOPIX.JP$ $Hang Seng Index(800000.HK$ $Hang Seng TECH Index(800700.HK$ $SSE Composite Index(000001.SH$ $CSI 300 Index(000300.SH$ $FTSE China A50 Index(.FTXIN9.CN$ $S&P/TSX Composite index(.SPTSX.CA$ $S&P/TSX Venture Composite Index(.JX.CA$
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Trade the trends via technical, fundamental, and macro analysis. Day Trades, swing trades, and long-term investments.
16KFollowers
2942Following
28KVisitors
Follow
102640653 : How r your thoughts on China adr n hongkong indices together with Shanghai market. Any updates on baba, Tencent
SpyderCallOP 102640653: So far, the market has stopped falling due to all of this talk about how the government is going to be helping the stock market. So that is good news so far. But aside from a couple stocks, erything has been generally rangebound with the chinese ADRs in US. Some sectors in China have been performing great over the past few months, like the financial sector. I like to be confident that the broader chinese market will get a lift with the governments help. But the chinese market has been disappointing for the past few years. So, I won't believe it until I see it. Until I see the government do something substantial that ACTUALLY moves the market upwards, then I will not be going all in until that point.
I will make another update on the chinese markets very soon.
102640653 SpyderCallOP: Thanks
102640653 102640653: There is an inverse head n shoulder pattern on baba. Won’t know if it materialise. Still awaiting for candlestick pattern to complete. Hopefully is good news . Just need your guidance to look at weekly patterns on baba charts . Thanks