Conditions that the stock should fulfill:
1. The stock must gap open to the upside on positive earnings, news, or strong buying in the sector.
2. Preferably, the stock should gap above the previous day’s high.
3. The stock should be in an up trend.
Tactics:
Once the stock has gapped open to the upside in the morning and has traded for a complete hour, the entry point at which to buy will be above the high of the 1st hour. In other words, the stock can only be bought after it has traded for a complete hour, and then only if it manages to trade above the highest price of the 1st hour.
The ideal situation occurs when the break above the 1st hour’s high happens several hours after the 1st hour of trading (mid to latter day).
Also, should the “gap open” take the issue from below to above a significant moving average like the 50MA or 200MA, consider it a bullish sign and therefore an extremely compelling play.
