Dummy Gapper Trade of the Day - BIDZ.com, Inc. (Public, NASDAQ:BIDZ)

Some of the criteria I use for selecting gapper setups are:

1. Open above or below previous day's high or low. The rationale here is taking out recent support/resistance. Stocks that gap within the previous day's range have S/R to breach before expanding. So I ignore these because I have my watch list of familiar stocks for that. On any given day, at least a handful of the WL stocks gap, so I don't need more of these to clutter my focus list.

2. Volume

When I first started trading gaps, if volume was not high in the early going I would lose interest and move on to something else. Later on when I became aware of the power of NR7, I realized that there was money to be made from gappers that were slow to get going, especially if the previous day's session was NR and inside and the stock was trending. The NRIB (narrow range inside bar) in an existing trend implies a pause ahead of the next leg or wave. A gap following a NRIB will often setup a shallow rounded base as a spring board to a momo vertical move. Case in point was DISH on Thursday, following Wednesday's IB on the daily. Yesterday BIDZ from the Briefing list, gapped up from an IB on the daily and formed a shallow rounded base on low volume. It setup a perfect dummy entry after closing above R2. After taking out the daily pivot high, it retested in an orderly fashion and continued on the next leg up.

PTRY was a name I picked up off of the Trade_Ideas pre-market scanner. In the 2-3 minutes leading up to the open, PTRY showed up several times as a high quality short (quality as measured by # of days).

It had gapped down the previous day and tried to recover but could not close above the declining 20 EMA. Late in the previous session, it started ticking down and this setup is a continuation play.

I traded this one Trader-X style using a combination of the 15 and 5 minute for confirmation. A weak open followed by a red inverted hammer inside bar. The 5 ema was still trailing price, so I needed the 5 to confirm the setup. I used the Fib. extension of the previous day high to the ORL to set my target. Initially, I was going to partial at the 38% extension, but when we got there, I thought it was going lower. After coming a penny shy of the half $ number, buyers started stepping in so I covered.

The only caveat in this setup was proximity to R2 which lined up with the ORL, so I watched closely to make sure that price took out R2 otherwise, it could setup a reversal.