Wednesday, January 11, 2012

Don't get frustrated by the gaps

Our readers know that if a stock gaps above our alert we either a) let it go b) wait for an intraday set-up to form  or preferably c) wait for a fade back to our alert to enter.     Happily,  the fade is happening a lot.   If you see a gap above the alert, don’t delete it and walk away with frustration.   Keep watching — what we’ve found in recent days is that the stocks are fading back to the important break-out zones, testing it, and then rallying again.   This of course happens frequently in the market, but we’re finding it happening more often than usual this week.    Let’s take a look at the examples just from the last 2 days:
We’ve had $OXY 98 in our newsletter for days — and it finally broke out yesterday morning with a gap above our number.   And then two perfect fades/trades for those who waited patiently for the entry with 20 cent stops and 1 point rewards:
$SLW 31 interested us long — again, gap up, but fade to number with excellent risk/reward day-trade entry.
$CLF 68 break-out from this weekend’s newsletter — same thing, gap up,and then fade back to our spot, and rally.
$FCX 40 from this weekend’s newsletter — yesterday it gapped above and wasn’t faded back to our spot, but look at today’s action.   Great pull-back to 40 and rip higher.
And lastly $DECK 87 from last night’s newsletter — again a gap above, and then quick fade to our spot for excellent risk/reward entry.
We’re currently experiencing a very benign market — don’t worry about the gaps,  just watch your spots and wait for the pitch.   Almost every single alert we had this week that gapped above gave an excellent entry later in the day at the original alert.