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You can chase volatility pops. By definition, if you want to trade, you've got to chase. Let's.. - YouTube
Channel: Stock Market Mentor
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I want to
look at Electronics For Imaging
( NASDAQ:EFII ). I
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featured this yesterday,
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EFII, as a volatility
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squeeze that looked like it was
poised to breakout;
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that's exactly what
happened today.
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I think you want to just stay long
this stock, if you happened to
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take advantage of that. Now, I
mentioned yesterday that this was a
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fairly illiquid stock
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so you needed to be careful about that.
By the way,
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I didn't move the stock, I don't
have that much
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reach; I don't think so. But I
want to show you this,
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let's say you looked at that video and
said, "Okay yeah, I want to buy
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this stock." This is what
it looked like yesterday, for two days in
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a row
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it had poked out above the upper Bollinger
Band
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and these volatility bands, that's what
they measure, very, very tight,
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ready to go; your high here was
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$30.88. So you're
not sure, the market was
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actually a little bit weak at the open,
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not that this should trade along with
the market
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necessarily, but you're not sure
whether you want to get long.
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So what you do is, in order to make
that decision, take that action, you get
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down
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into a really tight timeframe.
Frankly, you can even start with a
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one-minute if you want; you can see how
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illiquid this stock is. But first
thing in the morning
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the stock was on the move. Let's zoom
out to a five-minute chart
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and you really get a sense here that the
stock gapped up at the open,
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and so you look at this and you say, "Okay,
well
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I see this
stock up here at
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31.14 or so, wherever it was after the
first five minutes.
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It doesn't look to me like this stocks
going to pull back."
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By the way, isn't that what you would
expect, that it
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not pull back, because it is just in
the initial stages of a
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volatility expansion? So
think about it, if this stock
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were to pull back and give you an
opportunity to buy at
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yesterday's close, would that not be
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a failed breakout? So
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by definition you're going to be chasing
this stock,
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you're going to chase the stock. A lot of
times
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the way to trade a gap is to back away, let
the stock come back and fill the gap,
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this wasn't enough of a gap for
that, but
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a lot of times the way to trade the
stock is let the stock go,
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gap up, and then when it rolls over and
starts trading lower,
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that's when
you make your move,
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you take your stock. But here,
your looking
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at the daily chart, you're not expecting
a pullback,
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you were expecting this stock to do
essentially just what it's done,
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gap and run. So you look at this,
this is what happened after the first
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five-minutes,
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you go ahead and buy some stock. You
should be in this stock by 31.14, 31.15,
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easy. Then as soon as you're in
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you get out at this time frame and you
don't look back,
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you just let this stock run its course.
It's up nicely today, my bet is
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it will continue to move, not forever, but
should probably continue to move with
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this kind of velocity
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for another day or two. You just
have to know what your time frame is.
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Are you just trading these very short
swings here, where if
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the stocks gets up to $32.50
or $33.00 you're going to go
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ahead and sell?
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Or did you take the stock because you
like this uptrend and you want to stay
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involved?
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I can't tell you the answer to that
question; all I can do is tell you that
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that
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absolutely is the question that you need
to be asking yourself.
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