Everyday a very similar pattern I have observed in the stock market, while market opening time. Generally, I follow a 2 min candle chart pattern. This is a bullish market pattern. If you can master this pattern, you can take a few trades and can make a lot of money. One more information I would like to provide you that it is an intraday trading pattern with a gap up stocks. You can trade in future, cash and option, which ever financial instrument you are comfortable with.
As you know the key factor of
any business is demand and supply, in this pattern we will try to observe that
demand and supply zone after the first candle and with a gap up stocks.
Criteria of the strategy:
The stock has to be a gap up
stock.
There will be a Hugh buying need
to be observed during the first candle.
The volume of the first 2 min
candle has to be absurd (example: 3 million, 6 million, 1000k or higher but it
should not be in 100k or 200k.)
the stock should be shown up
about more than 3.5 to 5 % up after the first candle.
Effect on the price, if the above criteria
are fulfilled:
The effect of the above criteria
will be, after the first candle the stock will start falling, till its last
support zone. You have to be cautious about the formation of the first candle and
the next few candles. To understand the perfect resistance zone, you can also
use standard pivot points and try to keep track of the round figure price which
will act as a resistance zone.
Your action:
you can
sell the stock after the first candle and try to maintain a stop loss just
above the first candle or the upper pivot point, wherever you are comfortable,
as per your risk apatite or money management rule. you will observe that the
stock will fall with a little volume till its last support or last day high or
till its bottom. which can give you a profit of 2-4% within 30 to 40 min time.
Let’s take an example for more
understanding-:
Blue line is Vwap, Red line is
50 SMA, Red straight line is R1 Pivot and Black straight line is support price.
We are also observing the volume in the bottom of the picture to track demand
and supply.
Trade -1:
In the above example, the opening
candle satisfy all the criteria and look how beautifully it has supported the
logic. In this example you can sell the stock in between 198 to 197.5. the
pivot is 197.87 and which is also near a round figure price 200. So, a selling
is must.
Now look at the square of
position, it is also near a round figure and a previous day, immediate support
190. you can maintain a stop loss at 200 or at the first candle top in this
movement. In this example the logic is working superb. Now calculate the % of return
or movement in this 30 min, it is equal to 5%. Isn’t it beautiful?
Trade -2:
Now you can take another aggressive
trade here, you can buy at the support and try to square off the trade at Vwap
price. Have a look on the below picture, if you missed the first trade.
Now you can buy at 190 or 190.2 and maintain
a tight stoploss, and you can square of the position at Vwap price. In the
above example the stock is giving almost 2% of profit in this move.
Do not try to do it again and again on a same
stock on the same day, remember that it is an early morning trade strategy. Try
to avoid those stocks which are in news.
How to identify the stock: Try to observe all
the gap up stocks and specially those, which has a rally previous day.
If you practice this strategy, you can make a
good money in early morning in 1 hour.
Psychological explanation of this
movement:
Firstly, the stock is in uptrend and the
stock is in bullish pattern, many buyers have decided to take the early morning
buying, that is why the buying sentiment is high and stock is gapped up. During
the first candle the buyers jumped in but the previous day buyers are also getting
a good profit because of the gap up and after the first candle and they also
have pre-decided to sell out there holding, future contracts and options at the
near price of the round figure. On top of that a standard pivot point price is
also giving a resistance for the stock. So, the first candle will consume all
the aggressive buyers, make a huge upside at the beginning on price front and create
a huge volume. To move further on the upside the stock needs more aggressive
buyers. But unfortunately, the stock is not having such buyers, because of the
high price fluctuation. Buyers will only be interested if they can get some
more discount. So, the price has to fall.
once the price reaches to its support for the
first time some aggressive buyers will try to buy the stocks and in these
points all the sellers has already sold their position and they has already
cleared their position or the newly traders will Surhoff their position (you
will also do so), hence it will give a snow ball effect on its first support price
and the stock will bounce from the support price. Till Vwap the price will
bounce as some players who was left over during the first time sell off rally,
they will participate here hence there will be some seller live in the vwap
price. Hence, we need to square off here if we have taken any buying position.
I have observed these behaviours quite
frequently in the market. Trade with this strategy and make money, please
maintain a slop loss as well it will protect your money if you are wrong.
Please remember that it’s a probability game and I have observed this 80% of
the time to work.
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Be safe and keep trading......................
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