A trader explains how to fade gappers in the first 30 minutes after market open. Look for stocks down roughly 15% from open with falling volume by 10am. If a stock is above the open at that point, it's a red flag to downsize or exit.
So let's take a look at a graph here. Here you have the market open and in years past, a lot of the times they would spike up a little bit and then start crashing down. This is the open price right here. And let's say this is a 15% drop from the open. Let's say this is like 10am So 30 minutes after the market is open, the best fading gappers are going to be the ones below the open at that point. So by 10am that's usually my kind of time frame where I try to check in on what the stock is doing. And if it's holding above the open at 10am Then I'm looking to downsize or to cut the position because it's a red flag that it's not behaving properly. But if it is fad 15% or more by 10am Then that's a good sign that it's going to continue fading. And also you want to see the volume profile. Let's say this is the volume right here. You want to see the volume decreasing because that kind of indicates less kind of manipulation whenever there's high volume. It kind of favors more manipulation and more buying interest. So this would be an ideal pattern. By 10am it's below the open. By 15%, the volume is decreasing. If I'm still in this position, I haven't taken any profits. I would consider holding for an ADF as I call it, which is an all day fade.
