Identifying short term trading patterns is the lifeblood of professional traders. By patterns I don’t simply mean a simple pattern one might draw on a chart. I am referring more broadly to catalysts that will in turn lead to price action that I can use my trading skills to take advantage.

Yesterday Goldman Sachs (GS) downgraded SNDK. This downgrade occurred on a day when the market was gapping to the upside more than 1% and money was flooding into the equities market from the opening bell. SNDK didn’t participate in market’s upward momentum and was sold strongly on the Open (see chart below) and eventually had a second down leg later in the day.

A single downgrade in a single stock which then traded lower intraday is not a pattern. It is simply something to take note of. I did. Today was a slow news day so I mentioned in the morning meeting that GS had added LULU to its “buy list”. In the pre-market the US equities markets were showing some weakness but LULU was showing strength indicating it would gap higher on the Open. Here is an excerpt from our pre-market gameplan where I highlight the stocks I’m most interested in trading on the Open.

After the market opened LULU traded up to a longer term resistance area just below $50. There was a clearly identifiable seller on the tape at $49.90. This led to several short term moves lower but eventually when the seller lifted LULU continued its upward trend.

I will continue to monitor GS upgrades/downgrades on US equities for potential trading opportunities. These ideas and others are part of our Stocks In Play call each morning.

Steven Spencer is the co-founder of SMB Capital and SMB Training and has traded professionally for over 15 years. His email is [email protected]. for a free trial of the Stocks In Play call send an email to [email protected].

Disclosure: no relevant positions