The Opening Bell By Bill Panetta
Probably the hardest part of the trading day for most new and basically any trader is going to be the first 15 minutes of the trading day.
There are lot emotions that run high during this period. For me personally I have always tried to find ways to try and keep my emotions from getting out of control so I don’t make bad trades. Especially in the first 15 minutes of the day.
Through trail & error over the years I have come up with some strategies that work for me.
THE 10-MINUTE HEAD FAKE ON THE OPEN: I am starting to see this more and more now. This Market Maker Tactic (IMHO) is to shake out a lot of weak longs especially in a hot stock.
I will give you to 2 great examples of this trick.
AGIS: yesterday (11-07-2003) first thing MM”s did is they gapped it down, that was there first scare tactic. Now what we are going to focus on is the opening price for agis.
The opening price was .271 first print of the day. Remember stay focused on the opening print .271. Here comes the 10-minute head fake. The stock makes a low @ .20 in the first 10 minutes of day. I am watching this all happen on my level 2 screen BTW. AGIS makes a bottom at @. 20 now here is what I am looking for on a reversal. As soon as I saw the reversal happening I started buying in @ 23-24 and picked up 10k shares for this trade. Remember pay attention to the opening price of .271. That is my guide through this whole process.
Once AGIS traded through the opening price of .271 the stock exploded and within basically 1 hour of the trade it traded as high as .75 cents. I had personally had gotten out .70 and I was done for the day. This trade will last usually 1 hour.
What are the key points? Stock makes a bottom in first 10 min. then comes back and trades through and closes above .271 the opening price within about 5-10 minutes after it making the bottom at .20. My stop loss is .20 if breaks .20 I am out for a small loss. My risk was $400.00 but my reward was over $4500.00.
Another point I will make is I will only make this type of a trade in a hot stock that has a lot of volume. A lot of liquidity.
Another point is it that the stock has to be above the 5 & 10 day moving average for this kind of trade. It has to be in full motion.
FNIX: (11-03-03) Another great trade. The 10-minute head fake was on this stock as well. Opening price .93 within 10 minutes makes a bottom @ .83 I buy 10K shares @ .86 again are main focus is the opening print of .93. The stock explodes through .93 the opening price and hits a high of 1.19 within 1 hour of hitting a bottom. The MM”s can kiss my butt. Money in the bank. More head fakes please. You need to use level 2 for this type of trading, if you don’t have it get it. Risk 300.00 Reward 3,000.00
GAPS: How do you play the GAPS? Are they real or fake. Is it really a GAP & RUN or a GAP & TRAP? These are tough questions to figure out & answer.
For me what I look for in GAP is the strength of the gap. Is it an outside gap or inside gap? For me I want to see an outside gap. What is an outside gap? A gap above the previous days high and hold it without coming back down. For me the first 3-5 minutes of the morning are critical on a gap. I focus intensely on the opening price of the day and the low of the day the first 3-5 minutes. What I am looking for on a very strong gap is for the open & lows of the days to either be equal or to be within 1or 2 cents of each other and it has hold that the first 3-5 minutes.
Heres great example
AZAA: Thursday 11-06-2003
GAP & RUN: stock closed on Wednesday @. 85, the next day it opens @ 1.01. Strong gap. It's an outside gap very strong. Again first thing is we look at is the opening price of 1.01, secondly I am watching the spread between the opening price and the low of the day which 1.00. It held that spread for the first 3-5 minutes, bammmm
25 minutes later it hit 2.00.
The main focus was the spread between the open and the low of the day in the first 3-5 minutes of the trading day. If you go into this type trade or if you’re in the trade already in this scenario your stop loss becomes the low of the day off that tight spread.
EXTI: Friday 11-06-2003: Another great trade. I made bank on this on Friday as well.
GAP & RUN: The stock had fantastic news. Another outside gap. The previous day close was at .84 then opened the next day @ .89 well above previous day high of .86. Now I am watching how it trades around the opening price of .89. Remember everything revolves around the opening price of the day in the first 15 minutes. Remember your watching this on your Level 2 screen.
Open is .89 now the low of the day is .885. I have my tight spread that I am looking for in the first 3-5 minutes of the trading day, and watching this develop with level 2. As soon as I got my tight spread set up I bought 10k shares @. 92. All I have to do know is make sure it does not break the low of .885 that’s my risk. In one hour it hit a high of 1.15. My exit was .1.12. My risk was 400 my reward 2,000.00 one hours work.
**** I will only make these kinds of trades if the stock trades above 5 & 10 moving averages.
GAP & TRAPS: The only thing I will mention about a trap is if a the stock gaps up and stays flat for 10-15 minutes and you see the high of the day equal to the opening price chances are it’s a trap. Another words if XYZ stock HOD is .50 in the first 15 minutes and the opening print is .50 and the low is .48 after 10-15 minutes and you see it break the low. 48 watch for the trap. USXP is a great example Friday 11-07-2003.
Other traps I see on regular basis are when I see stocks being promoted via email by pump houses. You get the initial gap it holds up 10-15 minutes then comes the trap. ask your self these questions .
Does it trade at least above the 32, 10, 5 daily moving averages, at least you know its an up trend. If not don’t touch it.
This should help you guys understand the opening bell a little better.
***** This post will be stored for future reference in the IBOX on this board.
Happy Trading
And remember, “ May the bull be with you”
