An often overlooked yet powerful piece of information when it comes to trading is as simple as knowing how a stock closes (trades at the end of the day).
Is the stock strong and closing on the high, or is it falling back and closing in the middle of the range?
You might think who cares, as long as the stock is closing up.
I get it, it can be frustrating to miss a move or a portion of a move.
So when stock starts moving in the morning, you want to jump in right away.
If the stock stays strong all day then great.
But when it doesn’t, well that can be downright depressing. All you had to do was be patient and wait for more confirmation.
Today I want to share another little trick I have found to put the odds in my favor.
And it’s as easy as paying attention to how a stock is closing the day.
I use this little known technique as part of my strategy to find the stocks that are most likely to make a continued move the next morning… allowing me to grab profits overnight.
I’ll show you exactly how I use this little trick with a trade I just took last Monday in T2 Biosystems, Inc. (TTOO).
This is one of my favorite setups in the market, the consolidation breakout.
There’s nothing complicated about it.
In the chart below, TTOO is trading in a consolidation range (between the two blue horizontal lines).
This just means that it is trading in a defined range between support and resistance as seen in the chart. Basically it’s a period of indecision.
It’s a chance for the stock to catch a breather while investors jockey for position in the next move. It could be building demand for the next move up… or vice versa.
For a long trade to set up, TTOO needs to break above the range.
Which happened on Monday.
Another key to trading a breakout is volume. It’s really very important to this type of trade.
When a stock moves on strong volume, that is letting me know there is real demand behind it.
So I want to see a spike in volume when the stock breaks out of the range, as seen in the chart of TTOO below.
There’s got to be something more to it right?
Now look at the next chart below.
I marked two more times where the stock had a spike in volume and a nice move up.
But for some reason it didn’t follow through the next day.
This brings me to something I always keep my eye on… how is the stock closing.
Look at two days where the stock didn’t follow through. Where TTOO close on those days?
On the first day marked, the stock closed way down. And the second I have marked, it pulled back at the end of the day to close in the middle of the range.
Why is this important?
If you think a stock is going to be up tomorrow morning, are you going to sell it the day before?
No, of course not.
So when I see a stock closing strong, as TTOO did on Monday, I know people want to be in that stock.
And that ups the odds of the momentum continuing into the next morning.
Let’s get a closer look at this:
In the 15 min chart below, you can see volume ramp up in the morning as TTOO began to break above the consolidation area.
But I’m not buying yet.
Like I said, I want to be in a stock that other traders still want to be in at the end of the day.
So after an expected pullback in the afternoon, TTOO starts to make a second move up.
And the strength is as clear as day, with the stock closing near the high on increased volume.
This is what I want to see.
So I grabbed my shares and sent my members the trade alert.
And the next morning I was grabbing $1,025 in profit.
There is nothing like a good coffee and green trade to start your day.
That’s why I pay attention to the strength of a stock at the end of day.
My members didn’t do too bad either.*
If you want to learn more about the strategies I teach my members and use myself to take small accounts and turn them into something real, check out my getting started guide.
You’ll get all the information you need to get started on the right foot and more.
And if you’re ready to jump in and start trading, get all the tools and guidance you need…
First things first, if you don’t know what a short squeeze is, you can get all the info right here.
Now that you’ve gotten acclimated with the term…you should be asking…
Why should I care?
Well, when a short squeeze gets going… those who bet against the stock flood the exits — and that causes stocks to skyrocket with “no ceiling in sight.”
In fact, if you get caught on the wrong side of a short squeeze… you could literally blow your account out in violent and quick fashion.
However, if you know how to play the long side… It could be a monster payday!
There are specific market forces that create the fuel for an epic squeeze.
When I stalk explosive opportunities in the market, I focus on the overall concentration of short interest (days to cover and short percent of float), and the recent price action.
In the right setting, those two simple indicators allow me to spot potential parabolic moves in stocks.
Once the shorts panic and start to cover, it creates a demand that can not be matched… and in turn, creates the most powerful move you will ever see in the market.
The good news for you, I am always watching stocks that have the potential of getting caught up in a squeeze, and today I am going to share those stocks with you…
Today I am going to share two stocks that were previously featured as short squeeze candidates.
They have since gone on to squeeze up and fall back down. But there could be another squeeze setting up.
So now I’m eyeing them again and I’ll show you why.
Ocular Therapeutix (OCUL) is a biopharma company that focuses on the formulation, development, and commercialization of therapies for diseases and conditions of the eye using its bioresorbable hydrogel platform technology.
Concentration of Short Interest:
As you can see the concentration of short interest is not off the charts, but it is high. But it also has interesting price action, and I will show you how this puts the stock in squeeze territory.
Another interesting thing to note is that an insider upped their position by about 40% in March in the $4 range. Current insider holdings are around 10%, with institutional holdings over 50%.
Before getting into the current price action, let’s look at what happened the last time I featured this stock as a squeeze candidate.
A look at the previous setup:
Below is the exact chart I showed in my post on 2/23.
As you know, when people are short a stock and it’s going against them, they are losing money.
So just take a second to consider how you would feel if you were short this stock right now. It’s trending up, each pullback is at a higher moving average showing the growing strength of the move. And… It’s trading just under its 52 week high.
This is big. If the stock catches a bid to push it through the 52 week high, that could be the catalyst to pressure the shorts to run for the door.
And what happened next?
After a pullback to test the 50 day again, OCUL caught a nice squeeze almost doubling in 3 days.
Of note to point out. A squeeze can get out of control and go on and on which is why you don’t want to get caught on the wrong side… but it can also be a parabolic blow out, shooting up and coming back just as fast, so be ready to grab your profits.
If you are up 100% in 3 days, you better come away with profits. Otherwise, you need to evaluate your trade management rules.
Now let’s look at today’s price action:
Notice any similarities?
Just like in February, OCUL based at the 200 day and then began a trend up forming a stair step pattern.
It isn’t as tight as the first time, but what is in these current market conditions.
What I’m Watching For:
It’s a tricky spot here, as it could go either way.
During the previous squeeze, the high was at $8.12 and the highest close was $7.40.
So there will be a lot of shorts trying to protect their position at those levels. This area will be a key battleground.
But if the stock can get above there, this would put the pressure on the shorts. Potentially forcing them to cover and squeeze the price up.
This stock hasn’t been above $8 for years, so there could be a strong move if buyers can force the shorts out.
Per the Vivint Solar website: “Vivint Solar provides homeowners with simple and affordable clean energy. We believe that going solar should be headache-free and hassle-free. That’s why we supply the solar panels, and take care of all the installation and maintenance—for little to no upfront cost.”
Concentration of Short Interest:
Of particular interest in VSLR is the level of institutional ownership at a whopping 98%.
And like OCUL, Vivint was also a stock I featured as a short squeeze candidate in the past.
A look at the previous setup:
Below is the exact chart I used for VSLR in my 1/24 short squeeze post.
Looking at the chart VSLR was moving up in a stair step pattern. Starting in October, the price began trending up along the 200 day SMA, forming a stair step pattern.
In December, the 20 day SMA crossed above the 50 day with both moving averages turning up.
All bullish signs.
And what happened next?
VSLR pulled back to test the 50 day before squeezing up to a high of $13.
Now check out the current price action:
After hitting lows in March, VSLR began trending up in a stair-step pattern.
With high short interest and institutional ownership, could we get another squeeze?
What I’m Watching For, And What I Don’t Like:
There are some key differences in VSLR this time around.
First, the stock is below the 200 day. Looking back at the previous trend into the squeeze, it was riding above the 200 day which shows more strength.
Being below the 200 day AND below that previous trend, there will be more pressure from the shorts to keep the stock below the $7.50 area… and really all the way to $9.
And the second thing I really don’t like to see is the close below the 20 day over the past 3 days.
VSLR had been holding above it for the past month.
It could just be shaking out some weak hands. We’ll see this week, it’s either going to push back against the highs or fail.
To get me interested, I need to see it pull in some volume and push through the 200 day to get the pressure on the shorts.
It doesn’t have to break above tomorrow or this week even. But I would like to at least see it make another high while I wait for the right setup to pounce.
Both of these stocks offer potential that can lead to a short squeeze.
I will be keeping a close eye on each of these for their potential to put some pressure short sellers.
But while I am watching these stocks… I am also trading every day with my core Profit Prism system… and I am absolutely crushing the market.
If you want to keep an eye on potential short squeeze stocks and see how I make money on a daily basis, Join Profit Prism Platinum to see it for yourself.
The economy is completely dislocated from the stock market.
If you haven’t accepted that yet—you’ll probably struggle to make money.
Price action, momentum, and catalysts are what you should be lasered in on…
Believe it or not…
Logic and reasoning will fail you.
I would say most of the stocks I trade defy rationale.
But does it really matter?
After all, I’m just trading not investing…
The whole point is to be in and out with a profit…in a relatively short period of time.
Today, I’m going to show exactly what I’m talking about with a trade I took this week in Genius Brands (GNUS).
I’m calling it my Stay at Home Trade of the Week and here’s why…
Genius Brands is another stay at home play that hit my radar recently.
The children’s television programmer provides “content with purpose” for toddlers to tweens.
Think cartoons that entertain as well as enrich and educate. That’s a dynamic duo for all the parents out there.
And with all the “Stay at Home” orders around the country, it’s a great play on current themes.
To add to the interest, just last week, they announced a licensing agreement with Mattel to sell toys based on their popular shows through retailers like Walmart and Amazon…
And even bigger, they announced a brand new on-demand children’s programming channel, the “Kartoon Channel.”
With the channel going live June 15, it is expected to reach over 100 million households and over 200 million mobile devices.
That’s a lot of households, but it makes sense since the service will be available through all the popular subscription-based services – Amazon Prime, Sling TV, Apple TV, major cable companies, and the list goes on and on.
I first pointed this stock out on Wednesday’s Platinum midday watch list, when I noticed the stock making some big moves after the release of its shareholder letter detailing the launch of “Kartoon Channel.”
GNUS shares had already made a few runs higher on solid volume so far this month. And even though GNUS was looking strong on Wednesday morning, I wanted to make sure the increased demand would hold through the lunch hour.
And to my delight, the shares were making a beautiful pattern of higher highs and higher lows through lunch.
I didn’t actually make my move until later that afternoon though.
With a trade like this, I’m looking to catch an overnight swing from the increased demand and upward momentum. So waiting till the end of the day to verify continued momentum is key.
And that’s exactly what I saw when I decided it was time to pounce on this one and add to my $50K Challenge portfolio.
Continued strong momentum with volume and price ramping up at the end of the day, you can’t beat that combo.
I bought 7,500 shares at $1.154 average, targeting a move up to $1.50 – just off GNUS’s recent high of $1.57.
And the very next day I cashed out with $1,520 in profits.
And I know some of my $50K Challenge members held on even longer and nabbed some pretty sweet rewards!
Just look at the gain Brandon pulled in playing my GNUS alert.*
With GNUS tapping as high as $1.89 yesterday, this is an example of how trading your own plan can really pay off.
I’m here to teach you and help you as much as possible, but always up to you to find what works best for your trading. That’s what will make you consistent for years to come.
*RagingBull.com, LLC utilizes select testimonials depicting profitability that are believed to be true based on the representations of the persons providing the testimonial. However, trading results have not been verified and will vary widely given a variety of factors such as experience, skill, risk mitigation practices, market dynamics and the amount of capital deployed. It is easy to lose money trading and we recommend educating yourself as much as possible before you even think about trying it. Past performance is not necessarily indicative of future results.