I spent some time yesterday writing how exciting it was to see some traders on the desk add to their game a new trade. Instead of only looking for the quick profit taking a scalp short in a stock gapping higher they looked to capture the larger move to the upside. Here is what I wrote:

We urge our desk to pay attention to the big picture during our AM Meeting. To pay attention if SXCI is accumulated after the initial selling pressure subsides. Are the bigger players viewing this acquisition as such a huge positive that they are willing to accumulate shares 6+ points higher than yestrerday’s close? If so, perhaps the stock will trend up later in the day. And perhaps have several days of upside follow through.

Today offered a chance for traders who did well in SXCI yesterday to capture the second day follow through. Here is a chart from today’s price action. On the Open SXCI traded to two key intraday prices that offered good r/r entries on the long side. The first was a dropout right on the Open to yesterday’s breakout area above 87. The second potential entry was at 89.50, which matched yesterday’s high. The first entry was quick with no consolidation so good risk management would have probably limited a trader to 1/4 position size. But the second entry around 89.50 (where I got long) held for about 20 minutes offering an opportunity to build a larger position.

SXCI ended up being the strongest stock in the market today. Was that predictable? I don’t know. Do you think it was predictable that AMLN would trend for several days after its initial gap up last month? I’ve included the AMLN chart as well for comparison.

Steven Spencer is the co-founder of SMB Capital and SMB University and has traded professionally for 16 years. His email is [email protected].
No relevant positions
*live trades discussed in this post took place in T3 Trading Group, LLC a CBSX broker dealer