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Patterns To Watch

Is This Currently The Most Important Pattern? 🚀📊

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Written by Timothy Sykes
Updated 9/6/2023 6 min read
Is This Currently The Most Important Pattern? 🚀📊 Thumbnail

This might sound crazy…

But if you want to make more money from trading, why not follow the money?

That said, nothing has been hotter than trading short squeeze plays…

Today, I will break down the pattern that helped me nail single-day triple-digit movers VERB on Tuesday and PALI on Wednesday…taking me to $7.5 million in career profits.

Why should you care?

Because if this continues, I expect this pattern to play out a few more times this week, leading to potentially handsome profits.

Why The Shorts Are Getting Worked

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I’m not going to lie…the majority of the stocks I trade are fundamentally weak companies…some are pure trash.

But I’m not investing in these companies…I’M TRADING THEM.

And that’s where short sellers screw themselves.

They are so focused on the fundamentals that they forget they are trading.

Who cares what the fundamentals are if you are in a trade for a few seconds or minutes?

You have to be able to manage risk, right?

If you short a stock and it goes from $2 to $10, can you handle that from a risk management perspective?

Most traders can’t.

Short sellers are so narrow-minded that they forget that this game is about price action.

When The Worst of The Worst Become The Best of the Best

students kyle mari and jack
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If you really want to thrive in this current market, you have to be open-minded.

You can’t think in terms of fundamentals…

In fact, thinking logically could be detrimental.

I know…that sounds crazy…but recognize the market we’re in.

For example, the ticker symbol VERB didn’t deserve to go up as much as it did on Tuesday…

Earlier in the day, the company announced a “groundbreaking TikTok integration.”

Could the news be any less significant?

But again…that’s not what matters.

What matters is if there is volume in the stock.

The stock went from $0.71 the day before to a high of $3.30, and it traded over $105 million shares.

Source: StocksToTrade

I didn’t have the world’s greatest trade in it.

But I did recognize the volume surge in the pre-market…

And I waited for a panic dip buy near the open.

While the shorts thought the stock doesn’t deserve to be up this much…

I was thinking how can I safely get into this play while trying to manage my risk.

AHH…risk management…something the short sellers know nothing about.

The next day all eyes were on the ticker symbol PALI.

Like the stocks before it, it had pre-market news with significant volume to go with it.

The company announced: Palisade Bio Transforms GI-Focused Pipeline Through Exclusive Worldwide Licensing Agreement with Giiant Pharma, Inc. for Multiple Oral Drug Candidates Targeting Inflammatory Bowel Disease.

And the stock was off to the races.

And again, I waited for some panic selling near the open to get my entry.

Source: StocksToTrade

I entered at 1.17 and was out by 1.41 right before the halt. 

The stock ultimately hit a high of $1.93 intra day…

But I’m not here trying to pick tops or bottoms.

My goal is to capture 10-15% without exposing myself to huge levels of risk.

So let’s break it down real quickly:

  1. Don’t worry about whether the company is “good” or not. Instead, focus on whether it has a pre-market catalyst or not.
  2. If it has a catalyst, watch the volume. Ideally, you want to be trading the heavier volume stocks.
  3. And of course, it has to be a high-percentage mover. Why? Because shorts are thinking this company doesn’t deserve to be up that much, the more they short, the greater the squeeze gets.
  4. Trade these stocks, don’t fall in love with them. For the most part, I’m looking at these stocks as plays. I know some of them have run significantly, but I’m not here to chase. I’m here to make a quick move and be out.
  5. Follow the momentum. I prefer panic dip buying, but if volumes dry up then the stock could just trade sideways to lower the rest of the day. Pick your spots, you don’t have to be in them the whole day or try to HODL.

Want to Learn More About Stocks Like PALI and VERB?

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Every day, my team and I host live training sessions.

These sessions discuss what stocks are moving and how to exploit them.

It’s a chance to discover how other successful traders pursue these opportunities.

And the best part is we are bringing them to you at zero cost. 

CLICK HERE TO SIGN UP FOR OUR NEXT LIVE CLASS. 

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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”