Stock Trading Education - Trading tactics & examples
Potential Entry and Exit Points for the Slam Recovery Play
the rarest bird of all the Slam plays. It's a commonly held theory that stocks
moving down a lot in one day usually do so on an overreaction.
However, stocks making a big one-day move down often do
so based on a consensus belief that the stock has lost value.
And it is more common for the downward pressure to continue,
than for it to reverse.
Screen for stocks crossing down through their 10-Day Moving Average
(MA) line, a one-day price change of at least -8%, average
volume of at least 100,000, and stocks above their 50-Day
MA line. Let risk tolerance be your guide as to whether you
take a long position immediately, or wait a day or two to
movement. You may want to wait until the stock moves back
up through its 10-Day MA line.
Potential Exit Points
As always, "when you've made enough, get out" is simple rule
to follow. To lock in profit while letting a stock run, consider
using a trailing stop loss order a safe distance below the
stock's average daily trading range that is consistent with your risk tolerance and your objectives.
Charting Example for the Slam Recovery Play
(ELNK) recovered nicely from an 11.5% Slam during the period thanks to a strong
move in its sector. Three days after the Slam, ELNK punches
back up through its 10-Day Moving Average line. Seven days
after the Slam, ELNK had not only recovered, but improved
by 48%. A rare but impressive recovery.
Entry and Exit Points for Short Term Slam Play
the rarest bird of all the Slam plays. It's true that stocks
moving down a lot in one day usually do so on an
overreaction. However, stocks making a big one-day move down
often do so based on a consensus belief that the stock has
lost value. And it is more common for the downward pressure
to continue, than for it to reverse.
to find these plays searching for day's "Winners/Losers" to see which stocks
on each of the exchanges are good candidates for the Short Term Slam play.
Stocks having lost 15% or more from the previous
day's close are what we're looking for - typically the bigger
the drop the better for this play. But, you still have to
be very selective. The best candidates for this play open
with a big price drop, run down a bit lower, start to build
a base at the low, and climb slowly for the rest of the day.
Potential Exit Points
The critical point in exiting any short term play is to exit
before the end of the day - even if you're in a losing position.
This is the most sacred rule of short term trading. It is difficult
to predict the next day's action in a Slam play, and it's
even more difficult to predict if the Slam has turned out
to be a positive Short Term Slam play. Many times the stock
heads lower again, and you could sustain huge losses by holding
over night. Set a specific gain you're looking for (consider 1/2 point
or 5% profit) and get out if and when it's reached. Alternatively,
you can watch the momentum and jump out when it dies.
Charting Example for the Short Term Slam Play
Two things made Beyond.com (BYND) a good candidate for a Short
Term Slam play, in the period shown. It opened just below its 10-Day Moving Average
giving it a support level to leverage against. It also gapped
down a huge 42% from the previous day's close making it an
even better candidate for the Short Term Slam play. After running
down just ¼ point from its open, BYND crept up the rest of
the day, closing up $4 ½ from its open.
are high risk and high maintenance plays
and Pullback with Support Slams are more conservative plays but still contain risk
out what caused the Slam and carefully assess the damage
the 10-Day Moving Average as your divining rod
that blow through their 10-Day MA aren't likely coming back
any time soon
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