So the key to trading these low float runners,
its not any patterns or breakouts, its actually
pschology
After weeks of drought in the small cap market,
where everything just gaps up and sell off,
we’ve finally had a week full of low float
runners, some even ran for multiple days.
These kind of market provide us traders opportunities
both long and short.
But how do you determine whether a runner
is a good buy?
Well, thats where Trader Psychology comes
in.
And we’re going to break down the psychology
of the crowd in this hot stock from last week
$SES.
What led this penny stock to squeeze from
$4 to gapping up to $10 on monday, and continued
squeezing to a high of $26?
How to identify potential long traps and short
traps?
And more importantly, how this stock triggered
all the actions in the rest of the small cap
plays such as $BIMI, IPWR, BNGO, and HEPA.
So if that sounds like something you wanna
see, please remember to always destroy the
like button for the YouTube algorithm, i’d
really appreciate it.
So SES day one was actually last Friday on
October 11, the stock gapped up to a high
of $3.70 premarket from $1.80 the night before.
Now all day on day 1, this stock just seemed
like any other gappers that we’ve had before
earlier this month and really for the entire
September.
Everything thats gapped up premarket will
either just dump at the open and sell off
all day, or it’ll pop for a little to get
longs excited and still dump.
So the market for the last month or so definitely
favored the sellers.
We were in a sellers market.
Where the buyers have to be scalping but there’s
no continuation on day two.
So thats why this reclaim during the mid day
on SES day 1 caught many short sellers off
guard.
All these mid day action is trapping longs
and shorts.
This kind of mid day action is where market
makers come in and fuck with you on low volume.
After the initial spike to retest premarket
highs failed, the brought it back on low volume
ot get more longs trapped, and quickly slam
it down.
And of course, there were some chat room pumps
involved there as well.
But, the dump was not enough to break $3 to
the downside so the longs still grasp on to
the hope of $3 holding during this mid day
consolidation.
But no they slam it down again for a third
time.
This is where most retail longs would have
gotten out.
And this is where they start trapping shorts.
When $3 psychological number broke, thats
a trigger for many short sellers to get in,
and ive been trapped in this kind of action
too on ASUR last week.
And after trapping this is where they brought
it back on low volume.
This is low float stock with 1.1 M shares
float so it doenst take much to prop it up.
And they proppeed this stock back to premarket
highs, not above it though, just abit below.
Why?
Because they wanted to trap more shorts here.
Because this is where shorts would come in
and add.
This premarket resistance around $3.7 has
held up 2 times before today, so the short
sellers are hopping in hoping that this would
reject again for a third time down to $3.
Many shorts were holding on to this because
thats been working the past few weeks, all
day fades.
On the other hand the longs have been very
eager for any opportunities to to make money
because its just been so long.
Hah, get it, the long traders have been waiting
for so long.
So after shaking out all the weak retail buyers
from the morning who wanted to sell, the majority
of the people stuck, were the short sellers.
So when the mentality of the crowd is overly
leaning to one side, the opposite tends to
happen.
Especially in these small cap stocks.
And since SES is a low float stock, when the
stock finds a bid and volume finally starts
coming in, And then thats where the mother
of all squeezes come in at power hour.
Where the stock dipped down to $4 and held,
and ran to $6 during power hour, and $9.70s
after hours.
On day 2, which is Monday Oct 21, the stock
gapped up 4 points to $10.
There are many short sellers who were stuck
short over the weekend, and also stuck premarket
on monday as well.
Because again, the market sentiment in the
last month, almost no tickers has held up
on day two, and if they do, they usually start
dumping at the open.
And lets consider the impatient long traders
who missed SES on Friday, thats me btw, but
still wnat a piece in the game.
Thats where many chat room alerts come in
on Monday, the standard, by the break of $10
and sell at $11.
So at the open, short sellers who were stuck
buy to cover, and chat room pumps allowed
SES to pop a little bit towards $10.5.
Now with this kind of overnight gap up, especially
over the weekend.
Most gap ups will likely pop, but sell off
much more after.
Why?
Because just think about it.
If you were long over the weekend, you’re
up 4 points, you would probably take that
money and run?
Right.
So ultimately, there were more people in already
long from over the weekend that wanted to
sell and take profit.
And thats why, Ive always stressed to not
rely on chat room alerts or indicators.
The most common chat room strategy is buying
breakouts.
But buying breakouts only work in limited
situations and in cycles where the buyers
have control.
Where there are parabolic squeezes to the
upside like SES after it reclaimed premarket
highs again from $10.50 to $14, but how often
does that happen.
And thats why theres no patterns that will
guarantee 100% success rate all the time,
you have to adjust your trading style, set
ups and strategies in various small cap sentiments.
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Charts are psychological representations of
traders decision to buy or sell.
As you may have remembered in my past videos
on Trader psychology.
Do not rely on chart patterns, focus on trader
psychology and trader the traders on the other
side.
Especially when you are trading small cap
penny stocks.
Whether you are long or short biased, its
always beneficial to study the other side
of the trade.
Its only because I understand how breakout
long traders think that I can avoid buying
this morning push.
And its by knowing how short sellers think,
and understanding when they are in pain, that
you can know they are likely to cover on any
major dips such as these ones.
And thats where I would want to enter long
as you can see in my weekly recap video.
And of course its also by tracking small cap
market sentiment, that you can see the overall
bigger picture.
Its by doign this that I can keep track of
whether the market, which is the crowd, is
too bullish or bearish.
If you want to learn more about trading psychology
and mastering the mental side of trading,
I have a video going over the best books to
study over here.
So SES was definitely a stock that caught
many short sellers off guard, and it also
ignited the buying volume on other low float
stocks in the same sector.
BIMI, YUMA, and SAEX also started moving the
same day.
All these tickers, are in the oil and energy
sector.
And they were all following the price action
of SES.
So when the leader of the pack is squeezing,
you can see these smaller ones doing the same.
This is a similar situation when we had the
shippers run in 2016 and the blockchain run
in 2017.
The leaders will squeeze for multiple days
and all the sympathy stocks follow behind.
So I was actually really disappointed when
SES sold off on day 3 so drastically.
I saw the gap down and I was looking for it
to reclaim and squeeze everyone out agian.
But that didnt happen.
And I think the reason is that the sentiment
became overly bullish overnight.
The price action on day 1 scared too many
shorts, and got everyone too eagar to buy.
And what doesnt help is that on Tuesday, there
were tons of other penny stocks popping up
on the scanner, PSTV, WWR and CTST.
So all the sudden we went from only one gapper
every morning, to too many potential buying
opportunities for the long traders.
Two scenarios are likely to happen when the
market is too overly bullish.
One, All the buying power from long traders
ares scattered around all these potential
plays, and chat rooms jump from one stock
PSTV to the next.
So that means the buying volume is divided
and not enough to short squeeze these runners
up.
And they all just chop around and sell off.
Two, traders forget about all the stocks that
were in play yesterday, which were SES, BIMI,
YUMA and RKDA. and they hop on the new hot
stock which was WWR. right?
How often do you remember to go back and check
the tickers you traded yesterday or the day
before?
Me?
I dont even remember what I had for dinner
last night.
I think i had a salad or something.
So i thiink both of those factors are why
this sector run ended so soon.
Yes these stocks could still bounce in the
next few days.
But ideally we need a more balanced market
in order have these sector bubbles hold up
for multiple days.
But remember, there are three key take aways
from trading sector sympathies.
First of course, identify the leader and the
followers, and trade them side by side.
Second, avoid the mid day low volume grind.
Doesn't matter whether it looks like its going
to go up or down, these low floats are extremely
easy to manipulate by market makers or get
pumped by chat room alerts.
Its best just watch or walk away and come
back when there are good set ups with substantial
volume.
Third, be aware of the market sentiment and
adjust your trading strategies as needed.
Shorting premarket gap ups was a good set
up for the last month, until the sentiment
changed when SES showed up.
Vice versa, buying breakouts worked really
well on day 1 sector runs with SES and BIMI,
but don’t expect the same strategy to work
on all the low float stocks that popped up
in the days that follow.
Check out these two videos if you want to
learn more about trader psychology in various
market conditions.
As usual these videos take me the whole day
to research and make.
If they helped you at all please remember
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