This Monday we made a Momentum Scalp Trade in Visa, stock symbol V. Perhaps you can make this trading pattern your own.

Let’s set up the trade:

On Monday June 21st V exploded intraday. Monday afternoon U.S. politicians reached an agreement on the regulation of interchange, or “swipe” fees on credit and debit card transactions. This language was expected to be added as an amendment in the Wall Street reform bill. After the news broke V spiked intraday. And then it found a range from 78-79. More buyers came into the stock and drove V higher.

There were two momentum trades here. The Intraday Momentum Trade which we will discuss during a longer form broadcast this Sunday on SMB University on StockTwits TV. I made that trade and held a core long while V was in an intraday uptrend. And then there was the Momentum Scalp Trade that most do not have in their trading quiver or have not mastered. I made this trade as well around my core momentum trade long.

I know many trading desks that specialize in momentum trading. They are very profitable desks that have made serious money in many different markets.

For this Momentum Scalp to work you must be in a Stock In Play. The news must be fresh. Signficant order flow must be likely to flood the stock. It is best if there is uncertainty to how good or bad the news is. Our intraday fundamentals must be met for such a set up to succeed.

So with this fresh news and the market not sure how positive this political event was we had an opportunity for some scalp momentum trades in V. An uptrend in V materialized. Most of the time V would trade higher and higher and higher. But then it was pause. A seller would not lift and go find higher ground. A seller would hold the offer. The seller was just sitting there and selling at the same price. On our Level II we saw green prints and green prints and green prints all at the same price, signaling a significant seller.

When the seller finally lifted now was the time to place your Momentum Scalp Trade. The play is: Pay the offer immediately when the seller lifts, and sell V when the stock slows into the upmove. V will go up and up and up and then stop trading higher. The offers on the Level II will lift and lift and lift and then stop lifting. You should expect an explosive upmove after this seller lifts. Sell when the stock slows and then reevaluate, consider your next momentum scalp.

If you cannot get V when the seller lifts then bid for the stock and hope to get hit on the bid. Often you will. Again sell when the stock slows.

One of our readers on the SMB Training Blog commented that momentum trading was not working lately. He would pay the offer and then the HFTs would force the stock lower, he would hit the bids, and take a loss. One of our developing traders sat in my office today and made the same point. The prevalence of HFTs caused losing momentum trades. This is true. But this trade will work when the news is fresh and their is considerable uncertainty as to how high the market will drive V. The HFTs will such off their machines or get overrun by the significant order flow.

As of late I rarely make these momentum scalp trades. But I will with an opportunity like V on Monday.

This is a Momentum Scalp Trade in V. Perhaps you can make this trading pattern your own. If you have any questions about this trade please send me an email, tweet, or post a comment on our blog.

And please watch SMB University on StockTwits TV this Sunday as we discuss in more detail momentum trading in V.