If you follow the morning gappers you have seen over the last few weeks that they have not produced the trades that they did at the beginning of the year. Just like all of the other strategies I have learned over the past year, they tend to be hot and cold. I believe the key to it all is something I learned in the military. Improvise, adapt, and overcome. This is how I have approached my trading. So I have to periodically make these adjustments on how I trade.
I still look for morning gappers that have gapped up but now I also look for those tickers that may have gapped down. I am still working on how to consistently trade these but I look for them to do one of two things right now. I look for them to either open strong and retrace some of the gap down, or I look for them to sell off a little more at open. I just watch the price action the first 15 minutes or so to help me determine how I will look to initially trade them . But ultimately I am looking for them to reverse and give me a trade with the bottom reversal setup I like to trade. Here is an example:
This ticker was on my gap down scanner and I gave it the first 15 minutes to try and give me some indication as to what trend it was going to take. When it traded below the VWAP I felt it was going to continue to sell off for a little while longer before I got the reversal so I shorted it. However, once I took a short position, the price action began to tell a different story and as soon as Level II indicated a possible trend change I exited my position and began to look for the reversal. I missed the initial entry but I looked at the VWAP as a signal for my next trade. If it bounced off of it and faded, I was shorting it. If it pushed the VWAP and held above it, I was going in long. As you can see it held the VWAP and I took a long position. I exited when I got a 1 point move.
This is the other ticker that I had on my gap down scanner that passed my vet. I didn't trade it because I had so much else going on but this is an example of a ticker that gapped down pre-market and opened above the VWAP and stayed above it. This would have been a long for me after it pulled back and bounced off of the VWAP.
Here are my Equityfeed Filter Builder settings:
Last <= 50
% Change <= -5
Day's Volume >= 100,000
Trades >= 100
I still vet these the same way I vet my gap up tickers. If I do not have any hits by 9:15 I will change the volume to 50k. Also, I will trade these using the 2 minute chart. I switch to the 5 minute chart after 11 AM.
Like I said earlier it is still a work in progress so I am studying them to make sure I have covered all angles.