You’re so close to consistent trading gains.
There’s only one thing holding you back…
I see it every day:
The opening bell rings. The coffee’s hot. The spikes are hotter. There’s face-ripping volatility in the market (especially right now).
You’re ready.
You scan for the biggest moves of the day. The strongest stock spikes pop up on your screen.
Perfect.
But then a problem develops…
There are several good setups from your scan.
The price action bounces around on multiple charts as the seconds tick by.
You can’t find a clean entry to believe in without feeling like you’ll miss the other moves.
And you have to make a choice:
Which stock should you focus on??
Almost immediately, after a frantic stab at one of them, the price action works against you.
Maybe it’s a dud. Maybe you should switch to your second pick…
A few stressful hours later, you’re red on the day. That’s when you see it: one of the stocks on your list printed a perfect setup while you were busy second-guessing yourself.
And you missed it entirely.
Not because you were watching the wrong stocks. Because you never knew what to look for in the chart.
It’s not hard to find the hottest stocks of the day. I literally give away my criteria for free in Tim Sykes Daily (more on this below).
What separates the winners from the losers is the ability to recognize the most valuable price action within a larger stock spike.
There’s a specific pattern to look for in the market.
And once you see it, every other stock drops out of focus.
The Hottest Stocks Every Day
Before we talk about this beast of a trade pattern in the market, let’s make sure we’re on the right hunting grounds.
Most stock spikes don’t deserve our attention.
The factors listed below narrow down the entire market to a handful of stocks that have the best opportunity for real, explosive moves intraday.
Here’s what I’m looking for:
• A price below $5: Low-priced stocks can move higher percentages with less buying pressure. A $2 stock can double to $4. But a $200 stock rarely doubles.
• A low float: A low float means a limited supply of shares. Usually below 10 million. When demand hits, prices spike faster for stocks with a lower supply.
• Daily volume of at least 1 million shares: Volume confirms that real interest exists. Without it, price spikes are unreliable and hard to trade.
• A news catalyst: This is the spark for the move. A press release, an FDA decision, a surprise earnings beat: something that explains why the stock is running and gives traders a reason to push it higher.
• A spike of at least 20% on the day: A stock that spikes 20% can spike much higher.
When all five boxes are checked, we’ve got a powder keg that’s ready to blow.
On any given day, only a small handful of stocks will meet every one of these criteria. That’s a good thing. It eliminates the noise from the market.
Once you’ve got a short list in front of you, the next question is: what do you do with it?
That’s where my patterns come in.
One of the cleanest, most beginner-friendly patterns is the breakout setup.
The Breakout Pattern
On February 25, we saw two stocks follow a breakout pattern perfectly.
• Larimar Therapeutics Inc. (LRMR) spiked 60% past the breakout level.
• XWELL Inc. (XWEL) spiked 62% past the breakout level.
Both of these stocks showed up on my scan before the move.
The share prices started below $5, the stock spiked at least 20%, the volume showed more than 1 million shares traded intraday, they each announced news, and they both had low floats…
Technically, LRMR had a float of 38 million shares. But it’s close enough to 10 million. Considering big stocks like NVDA have 23 billion shares in the float.
Breakout patterns are perfect for new traders because the price action is almost obvious.
• A stock spikes with news.
• It hits a top before pulling back (the breakout level).
• It consolidates sideways.
• Then it pushes through the breakout level.
You can see it clear as day on the charts below from February 24 and 25:
Source: StocksToTrade
LRMR chart multi-day, 1-minute candles.
Source: StocksToTrade
XWEL chart multi-day, 1-minute candles.
As traders, we can either:
1. Buy shares in anticipation of the breakout. Use the consolidation lows as a stop loss.
2. Buy shares after the breakout is confirmed. Use the breakout level as a stop loss.
Pay attention to setups that look like LRMR and XWEL.
Anything else is a costly distraction.
If you have any questions, email me at [email protected].
Cheers,
Tim SykesEditor, Tim Sykes Daily
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