Learning to Day Trade - Part 13

Dip Buying Morning Panics

It’s been a few weeks since I’ve made a new “learning” part and in this part I want to cover some dip buying techniques. I’m struggling with this because it’s so difficult for some reason.

This part is all about dip buying morning panics. Today, $RCII had a huge gap up on an earnings release and then a conference call. Normally you’d want to avoid trading during a conference call but I’m assuming it was over by the time the bell rang since it tanked out of the gate.

To dip buy you need to look for support and resistance levels from the previous day, weeks, or months. If there is no support/resistance level then the prior close price can also act as support/resistance. Level 2 can be useful if you see bids coming in and stacking or a massive buy wall of 50,000+ shares - it is not always necessary to use.

I have marked the prior close on this chart and you can see it clearly bottomed at that level exactly. The bounce was not insane, but it was a solid 50c/share of upside if you got in right at the prior close. If you got in at say $10.10 and waited, you would want to risk off $10.00 or a hard crack through $10.08. That way you won’t get faked out. It never dipped below $10.08 again so you could have gotten in on the higher lows near $10.15.

$RCII 1 minute candles

I should probably mention that this works best during the first 30 minutes and the bigger the drop the better. Beyond that time frame it’s more risky to buy panics. After that time I would want to wait for it to bottom and consolidate near a support level.

On the next stock there was also a lot of morning panic but there was no obvious bottom based on technical analysis. Around 11:30 AM it finally got down to ~$8.70 support before bouncing. I completely missed this one even though I was watching it. If I had bought I would have sold into the $9.15 spike and not held all day - that would have been most of the move.

$XNET 1 minute candles

This strategy just takes tons of practice and watching to master. I almost pulled the trigger on $RCII today but it’s hard to buy once it has tanked so much and it could just go lower.

The jist:

  • First 30 minutes for morning panics
  • Buy at technical support and risk it breaking down through
    • or buy at intraday technical support, selling into spikes

Friday Short Squeeze


I am not a registered financial adviser/broker/anything. Use this information for entertainment/informational purposes only. Any tickers mentioned are not recommendations to buy/sell/or sell short. They are used as examples only.