3 Red Flags That You're In The Wrong Stock

Check out these chart examples…                                                                                                                                                                      Good Morning! It’s easy to get caught up in the story of a stock… Maybe it’s getting mentioned all over Twitter and gapping up huge in the premarket. It has all the makings of an epic short squeeze…the stock has a low float and the chart pattern looks ultra bullish. You reach peak FOMO and decide to snag some shares up. But instead of going to the moon… it drops like a rock and you’re left staring at the screen like a deer in the headlights about to get hit by a truck. What went wrong? I’ll share three red flags you may have missed below… Want the hottest stocks to watch every day sent right to your phone? [Sign up for our SMS alerts and get stocks hand-picked by Matt Monaco]( Three Red Flags To Watch Out For The scenario I laid out happens to traders all too often. But the good news is, it’s almost always avoidable. Yes, losses are always a part of trading and sometimes patterns don’t work. But often the reason traders get caught off guard by a move is because they missed some essential criteria for the trade… We often talk about making sure a trade checks the boxes. But what about signs that give hints that you should avoid a stock? That’s what I'm talking about today — and there are three critical red flags you can learn to recognize to help you [avoid bad trades](. One and Done Charts History doesn’t repeat exactly but it often rhymes. So when a stock has [a history of big gap ups and fails]( chances are it will do it again. You might think this time it will be different for the stock, but that’s just a guessing game. You’re gambling. As traders, we want to put the odds in our favor. And odds are, if a stock failed every time it tried to run in the last year — it will fail again. So if you see a stock with a daily chart like this, run for the hills. What are the odds it will run this time? SPRC chart: 1-year, daily candle — courtesy of [StocksToTrade.com]( Instead, focus on stocks that have a history of running. A stock that can at least hold one-day gains or go on multi-day runs. Next, avoid stocks with… Low Volume Many new traders underestimate [the importance of volume]( when considering their trades. I can’t tell you how many times I’m asked about a stock that’s gapping up in premarket and has a nice-looking pattern and chart… But it’s missing volume. And without volume, none of that other stuff matters. Because without [demand in the form of volume]( a stock can’t have big moves. Trading low-volume stocks is also dangerous ... You can get stuck in your position or end up taking a bigger loss than you planned. That’s because low-volume stocks are often choppy and have wide spreads that make them almost impossible to trade. Because of that, the intraday chart often looks messy, with large gaps and time periods with no trades… HSCS chart: 1-day, 1-minute candle — courtesy of [StocksToTrade.com]( If you’re wondering what’s considered a low-volume stock, look at the stock’s float and see how much volume it’s trading relative to the float. Ask yourself if it has the potential for [float rotation]( throughout the day. The third red flag to look out for is… No News News is one of the boxes I like to check when planning a trade. I get so many questions about stocks that are gapping up in premarket and have a beautiful chart pattern setting up, but they have no news. We want stocks to have news to get traders excited about it. That brings in the volume we need to create big moves. And again, we want to put the odds in our favor when planning trades... A stock without a [catalyst]( and that’s not in a hot sector has less of a chance of making a meaningful move than a stock with news. Yesterday it looked like Minim, Inc. (NASDAQ: [MINM]( was going to have an afternoon [VWAP hold high of day break]( But without news, the stock couldn’t hold VWAP and it failed… MINM chart: 1-day, 1-minute candle — courtesy of [StocksToTrade.com]( [See more red flags to look out for here](. And get my guidance throughout the week with [my Market Update videos]( three times per week. Have a great day everyone. See you back here tomorrow. Tim Bohen Lead Trainer, StocksToTrade P.S. If you like receiving the Daily Accelerator every morning, mark my emails as important so they land in your inbox and not in your trash!   sponsored   FREE Wall Street Surveillance Algo Delivers “Instant Stock Alerts” With Average Gains of 81%+ in 2023. Millionaire trader, Matt Monaco has harnessed the power an exclusive trading algo to help find actionable trade ideas for you, every morning- straight to your phone. 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