The first chart is the monthly chart for GE. A quick look at long term support levels, and it was clear that the maximum move on this gapper was in the area of the March low as this level had held over several years.
The second chart shows the pre-market action. After the initial dive, $33.00 was a consolidation point and could serve as resistance should GE attempt a retrace after the open.
Trade that level with confidence after it carves out a spinning top with long upper shadow at the former support zone which will now act as resistance, even though the down sloping EMA is still far away.Edit: This strategy works best with highly liquid, large cap stocks. I wouldn't attempt this unless there was a lot of volume in pre-market.
2 comments:
Jamie,
I was ready to pull the trigger at that 4th bar but cancelled. With a 250 pt dn I expected alot more of the gap dns to go dn further: GE only a pt from 4th bar break.
BL,
I only focused on gappers with high pre-market volume. I knew that GE would not give much more than a pt., but it's low risk and orderly because of very high volume, so less risk of getting stopped out on a technical foul.
Lots of good short opps from my WL - ESRX, LRCX and MANT.
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