News Reversal, Film At 11
News reversals are a simple, straightforward approach to utilizing news
events to fade emotion and trade on the same side as the specialists and market
makers. This morning, in TradingSubscriptions.com
News Reversal Service, we had a good example of how the strategy works when
it plays out.
Intermune
(
ITMN |
Quote |
Chart |
News |
PowerRating) announced that data
from its Phase III clinical trial of Actimmune has produced less than desired
results. The stock was down 4% in the pre-market. Watch
for a gap down opening. If you see a reversal back up, look to go long just
above yesterday’s low.
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We get the gap down as expected, and the trade is triggered when
the stock trades above the previous low.
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The stock gains nearly 6 points from the point of entry.
It is important to note that this is an extreme example. Most of
the trades that are profitable net around 1 to 2 points. But the point here is
to show you the strategy and how it works. The names that appear are the names
most likely to gap due to news events, and then have a chance of reversing. If
you are going to employ this strategy, it is important to remember that it must
have a gap on the open above the prior high or down beneath the previous low.
Until tomorrow,
Duke