When you’re holding a runner overnight, the next morning can be nerve-racking.
If it gaps up, do you sell? Or do you hold for more?
Find the easiest setups right here.
A premarket gap on a runner often fades before noon. But if the stock keeps running after the open, selling into that pre-market gap leaves a lot of gains on the table.
Last weekend I was holding Stablecoin Development Corporation (NYSE American: SDEV) overnight. Before Monday’s open, I already knew what I’d do if it gapped up.
SDEV closed at $7.48 on Friday, October 2. The close was up about 104% on the day and near its high.
The stock kept going after the close. It traded above $8.00 within 10 minutes of the bell and spent most of Friday evening between $8.00 and $8.40. I was long from around $8.00.
On Sunday night, I wrote down two key levels for Monday. The best case was a premarket push above $10.00. If I got it, I’d sell some or all of my position into it. The failure case was $7.50. If SDEV lost it, I’d cut and reassess.
The third thing I wanted to see Monday morning was $8.00 holding as support.
SDEV was above $10.00 before 5 AM on Monday. On the first push it dipped as low as $7.72 and recovered, and it never traded $7.50 before the open. So $8.00 held in premarket.
From there it printed $10.00 or higher for most of the 5 hours before the open. The premarket high was $12.73. The last print before the bell was $10.22.
So by 9:10 AM, every part of the plan had come true.
The regular session opened at $9.71, about $3.00 under the premarket high. Inside the first 5 minutes SDEV was under $8.00, and inside the next 5 it traded $7.50.
So my sell price printed before the open, and my cut price printed within 10 minutes after it.
Before 10:10 AM it was under $5.00. The low of the day was $3.25. It closed at $3.94, down 47% on the day.
So the plan allowed 3 exits, and all 3 were available before 10:10 AM:
- Selling into the premarket gap was a gain of 25% to 59% from $8.00.
- Cutting at $7.50 was a loss of about 6%.
- Holding to the close was a loss of about 51%.
Not every runner that gaps up fades. Armada Acquisition Corp. II (NASDAQ: XRPN) closed at $23.43 on Thursday, October 1.
Its premarket high the next morning was $29.49. It opened at $29.00, almost exactly at that high. It ran as high as $53.00 during the day and closed up 68%.
SDEV opened about 24% under its premarket high. XRPN opened at its premarket high.
If you hold a gapped-up runner past the open, you’re betting it finishes the day like XRPN instead of SDEV. The whole gap is at risk in that bet.
SDEV lost all of its gap within 10 minutes of the open.
When I hold these plays, I sell some or all of my position at the price I wrote down the night before.
If you do the same and the stock keeps going (like XRPN), you’ll still make solid gains (just less than the absolute maximum, which is fine).
If it fades like SDEV, you have a clear spot to get out before the reversal to the downside.
Find easy breakout setups with StocksToTrade lead trainer Tim Bohen’s masterclass.
Stay sharp,
Jack Kellogg
*Past performance does not indicate future results
