What a week so far!
The midterm election is just hours away as I’m writing this. Tech stocks are swinging like crazy, and volatility is off the charts.
This is exactly the kind of market I love to trade.
Why?
Because big swings create big opportunities.
For example, in a market swinging this hard, plenty of stocks will dip under their recent lows, tripping traders’ stop-losses in the process.
Those flushes can be incredible buying opportunities.
But I don’t buy every flush. I want to see real panic first, plus one more thing before I’ll pull the trigger.
Right now, I’ve got my eye on four stocks in particular…
Here’s what each name has to do before I trade them.
BlackBerry Limited (NYSE: BB) is the first one.
Its low on October 15 was $7.96. Since then, BB has come within $0.05 of that price four more times:
- October 16: $7.99
- October 19: $7.99
- October 20: $8.01
- Monday: $8.01
BB closed Monday at $8.02, just above that low. With that many tests, $7.96 is an obvious spot for stops.
If BB dips under $7.96, those stops get tripped. That flush alone isn’t enough for me.
The one more thing: BB has to close back above $7.96 on the same day it dips under that price.
If it does, the traders who got stopped out sold for less than where it closed. The selling under the low already hit, but the stock still made it back up.
So I’d buy at the close, with my stop under that day’s low. If BB closes under $7.96 that day, I skip the trade.
Skydance Corporation (NYSE: SKYD) dipped under a low and closed back above it last month.
SKYD crashed on October 14. Its low that day was $6.63.
On October 19 it dipped to $6.61, under that low. It closed that day at $6.80, back above $6.63.
Buying the $6.80 close with a stop under the $6.61 low risked about $0.19 a share. SKYD kept climbing from there, and two trading days later it closed 15.7% higher than $6.80.*
AbCellera Biologics Inc. (NASDAQ: ABCL) did the same on October 23.
ABCL dropped under its low from the day before, then finished the day back above that low. Three trading days later it closed 15.4% higher than that October 23 close.*
Sandisk Corporation (NASDAQ: SNDK) is the second stock, and this one needs real panic first.
Sandisk has fallen hard since earnings, down about 19% across October 30 and Monday. I’m watching $1,050.00, close to its July 28 low.
If Sandisk gets a big flush down toward $1,050.00 later this week, I may start looking to buy it once it turns back up.
I expect the big swings to keep coming all week. More stocks will get flushed under their lows. I’ll be waiting for the ones that close back above them.
And don’t miss these live shows every week…
Stay sharp,
Jack Kellogg
*Past performance does not indicate future results