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Patterns To Watch

Which Stocks Are Morning Panic Dip Buys?

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Written by Timothy Sykes
Updated 8/18/2023 5 min read

Morning panic dip buys are one of my FAVORITE trades.

It’s one of my most consistent setups, helping me achieve a +75% win rate.

I’ve used this same pattern for more than two decades.

But the crazy thing is the average trader doesn’t know how to spot it, let alone how to take advantage of it.

However, since you’re reading this I know you’re not the average trader.

And since you’re working on elevating your game, I’m going to do my part and share with you how I turn this pattern into profits.

Premarket Movers & Gainers

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The first place I look for potential morning panic dip buys are amongst the premarket movers.

These are the stocks with the largest percentage gains in the premarket, which stretches from 4:00 a.m. to 9:30 a.m. est.

I will also look at stocks that jumped after the market closed at 4:00 p.m. est the day before.

Now, you won’t find most of these stocks on CNBC or major news networks. They’ll be focused on well-known companies, which isn’t what I’m interested, and I’ll explain why a bit later.

I want those random penny stocks that trade under $5.00 surging 50%, 100%, 200%…really eye-popping numbers.

However, these shouldn’t be random. Any stock can look like it’s up a ton if an errant trade or two executes.

No, I’m looking for stocks that are moving on news and important headlines with real meat and heft to it that’s timely.

Here are a few examples:

  • Earnings
  • Clinical data results or FDA approvals
  • Landing a big customer order
  • Non-dillutive capital raise

Without a headline, you’re trading solely on price action, putting you at the whims of chat pumps and other actors who can pull the rug out at a moment’s notice.

Bigger Moves = Bigger Bounces

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When the S&P 500 crashed in 2020, it took more than a month for it to drop 34%.

Bigger stocks tend to be less volatile than smaller stocks.

Volatility is what creates bounces.

Sure, you could take larger positions on less volatile stocks to compensate for the smaller bounces.

But I find them far less reliable.

Instead, I like small caps with lower floats and OTC stocks.

These stocks tend to be more thinly traded (IE see less volume on average). So, when big orders hit, the stock can jump or fall by dozens of percentage points.

Here’s an example from last Thursday.

This tiny stock with a 13 million float jumped in the premarket when news dropped about them financing shares at $1.35 per share.

Typically, Datasea Inc. (NASDAQ: DTSS) trades 100,000 shares a day.

They passed that amount within two minutes of the news drop.

Although the stock was only up $0.27, that’s almost 50%!

So, when it dropped back down to $0.70, a little less than 20% off the highs, I took a shot at a dip buy.

As I had hoped, shares rallied almost 10% where I exited for a nice little profit.

Here’s a more extreme example.

Renovaro Biosciences (NASDAQ: RENB) skyrocketed in the premarket.

This stock went from $0.875 to $3.375 on a news release – a 285% jump in minutes!

I bought the stock when it dropped back to $1.46, more than 50% off its highs.

I managed to sell at 1.57, a nice little 7.5% gain.

Connecting the Dots

stock trading for beginners in 6 steps
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For some of you, morning panic dip buys might look like I’m trying to catch a falling knife.

Heck, I’m trying to pick off 5%-10% on a stock that’s moving almost 300%.

But +75% win rate, a profitable track record, and more than two dozen millionaire students probably means there’s more here than meets the eye.

You want to know the secret?

The truth is I don’t use anything complicated or fancy.

In fact, many of you probably already have the skills necessary to trade exactly like this.

It’s a lot simpler than you realize.

You just don’t know how to put it all together.

I understand if you’re a bit skeptical. After all, if it was this easy, why doesn’t everyone do it?

So let me prove it to you.

Sign up for my next LIVE STRATEGY SESSION, and I’ll show you how I teach folks to take all these different skills and ideas and turn them into reliable trading strategies.

Click here to reserve your spot.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”