Day trades can be very rewarding when the important criteria in this article are met early in the trading day. We routinely look for one or more catalysts, together with volume and price action during the trading day that are significant enough to warrant our attention.
Catalysts usually include Tier 1 upgrades, 13F filings, comments from institutional investment managers, company earnings announcements, company events or press releases. All of these catalysts have a domino affect during the subsequent trading session. Volume picks up and price action gains momentum.
Finally, its important that all of these conditions are present, so if one or more of the underlying is missing, the reliability of the trading signal is affectively diminished.
The pre-market session from 7:00 AM to 9:30 AM leads up to the opening bell. The 30 minute period after the trading day starts is referred to as the “opening range.” We look for any unusual activity that might signal institutions are buying a particular security.
Overnight news, pre-market press release and Tier 1 upgrades or price target adjustments often happen during this time period.
RVOL and VWAP
Relative volume (RVOL) compares the current time period to the previous day. This detects important changes on intraday charts. We look for 5, 10, 15, 30 minute charts to show these significant changes in volume. They are very important. No volume usually means no momentum.
Volume weighted average volume (VWAP) is also extremely important as institutions and professional traders use this “average price” as a reference point during the trading day.
A rising VWAP tells us the stock is “in-play” when coupled with high RVOL greater than 2.0.
News Catalyst + RVOL + VWAP
Palantir Technologies (PLTR) met all three criteria.
News that Cathy Woods (ARKW) had been buying shares significantly affected price action. After the opening range price action pushed away from VWAP.
RVOL rose markedly compared to Friday and Monday.
Compare this to the previous sessions where VWAP was flat and RVOL was noticably lacking.
Stay sharp early in the trading day and focus on these criteria for successful day trades. Listen to our LIVE broadcast as well, as we monitor for the prime conditions.