No one wants to spend hours looking for high-quality setups.
Otherwise, you’ve gotta keep a schedule like Dwayne Johnson and start your day at 4 a.m.
I’d rather let someone else do the heavy lifting for me.
That’s why nearly every trade I find starts with our StocksToTrade Breaking News Chat Room.
I’m not just hawking this for my own benefit.
This room SAVES me so much time by delivering stock-moving headlines, their context, and web links as they happen.
They’re the ones that put me on to CGrowth Capital Inc. (OTC: CGRA) when they alerted me to this tweet midday on November 29:
That gave me the idea for my Weekend Trader, which netted some nice profits.
But you know all about that from Monday’s blog post.
What I want to talk about today is the dip buying opportunity that developed on Monday.
While I was on a plane from Paris to Bali, with no wifi, CGRA went from up 100% to almost flat.
This created the PERFECT trade opportunity, and I want to show you why.
So, next time you come across a stock that fits into this framework, you know precisely what to look for and what to do.
The Background
As I mentioned earlier, CGRA landed on my radar after Breaking News alerted me to the tweet they posted.
Now, the stock was already bullish when you look back over the last few weeks.
Looking at the daily chart below, you’ll notice CGRA started climbing as far back as October.
Volume had been building for nearly two months.
Just a few days before Friday’s move, price action heated up even more, with shares breaking out of their trading range on heavy volume.
So, when the tweet dropped on Friday, I suspected we’d get followthrough that led into Monday.
That said, I was cautious.
My 7-Step Penny Stock Framework spells out the lifecycle all Supernovas go through.
And I knew that there was a potential for a pullback shortly.
That’s where things stood on Monday.
Monday’s Dip Buy
To be fully transparent, I sold early on Monday and missed out on some huge gains.
After the stock gapped up, I wanted to lock in my gains…
And then it jumped 100%!
Friday’s close came in at $0.08.
Monday’s open landed at $0.095.
Within the first 30 minutes, shares catapulted to $0.162.
Now, the initial pullback came into $0.12.
To me, that’s not enough of a drop to warrant a dip buy.
Plus, it had very little volume.
The next one happened just after 1:00 p.m. when shares dropped from $0.155 to $0.115.
Again, that’s just not enough of a drop.
Remember, this stock jumped $0.08 from the prior day’s close.
$0.03 just doesn’t cut it.
But, when shares dropped all the way down to $0.095, things got interesting.
This one was a bit tricky, but definitely possible to turn into a long trade.
The first spot that stands out is the initial drop that bottomed out around $0.095.
That’s when volume really spiked and the stock came back to its open.
Ideally, I want to step in there or even wait for a bit more confirmation.
But keep in mind that these can rebound quickly.
That first candle after the last large red one jumped all the way back to $0.105.
Coming off $0.095, that’s a full 10% move.
Shares popped just shy of $0.11, so there was enough profit to be had.
Now, I want to take you a little further and look at the high volume green candlestick that occurred a few minutes later.
Normally, that would signal a reversal.
However, it didn’t happen after a major drop.
Instead, shares traded sideways for a little bit before that volume hit.
So, while it could have been a reversal, it didn’t align correctly.
Let’s say I did get in around $0.10 or so off that major drop.
I would have been able to lock in a 5% profit without much of a problem.
Going for 10%-20% could have been tricky.
In all likelihood, I would have dropped the trade for a small profit since it didn’t continue pushing higher off that low point.
You see, I don’t just cut losses quickly, I also want my trades to work the way I want.
Dip buys off a 50% drop should bounce hard and fast.
If it takes too long, I pull the plug.
As you learn, don’t be afraid to lock in profits early.
Eventually, you’ll get a feel for these things and begin to expand your winners.
—Tim
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