In my quest to help the intraday trader exploit the open better I offer another great setup on the open.  Again for those who struggle on the open it is not that this is a difficult time period to master.  It is that you are not in the right set ups.  I call this one The Battle on the Open.  And I love this play.  Let’s discuss.

CRDN was gapping down on the news below.  19.78 held the bid.  19.80 held the offer.  Then 19.78 held the bid again.  There was a battle.  In one corner was the 78c buyer.  And in the other corner was the 80c seller.  I looked at the underlying bids and there was a whole bunch at 19.75.  So I got long.  My risk was hitting the 75c bid, a 4c loss.  My upside was a reversal in the stock, or a significant upmove.  Either would have offered an excellent risk/reward.

Now let me make a few things clear.  There was significant volume done on the bid @ 19.78.  The bid held twice.  There was protection under the bid.  Also the market is in an uptrend which makes it more likely for stocks to bounce.  It was right on the open with the possibility that the selling was an overreaction.

Ok, so the play.  Get long in front of the 78c bid.  Hit if the bid drops.  If the 80c seller lifts then buy more.  Sell your first lot when the stock slows.  Hold the other lot for a significant upmove.

And so that is how it is done.  As you can see this was a chop.  Add this play to your trades on the open.  Add more like this and you are going to love this time period.

Best of luck with your trading.

09-Jun-09 07:36 ET: Ceradyne lowers guidance for FY09 below consensus (23.37 ) : Co issues downside guidance for FY09 (Dec), sees EPS of $0.70 vs. $1.48 First Call consensus, prior guidance $1.60; sees FY09 (Dec) revs of $420-440 mln vs. $461.90 mln consensus, prior guidance $465-500 mln. Co said, “Global economic conditions have continued to deteriorate, impacting many of our customers as well as a number of our businesses. In addition, body armor orders are below our previous estimates. However, we still expect good free cash flow performance for 2009. In order to better position the company in light of the current economic backdrop, we are continuing to ‘right size’ Ceradyne throughout our global operations.”

Don’t forget to follow us on Twitter!.