Sunday, March 18, 2007

Buy Late Sell Early

Joseph comes with a comment -
The saying is novices buy openings and pros buy closes.

Let's agree that this is true.

Now if this be true doesn't this fly in the face of the opening b/o group? Instead of looking for the high after 15' or 30' I believe given that the first statement is true to gauge one's opening b/o strategy on the 3:30 range and as long as it closes higher hold into the next days opening.

And I agree - in fact long time followers here know that I have made some nice gains and some nice losses using the overnight express. Last summer that's about the only way I would trade - buy late and sell early. This past week you could have made some serious coin on these two -

And, in fact I did make a good week on NFI all by itself. But here is the rub - finding the right stocks is sometimes easy and sometimes difficult. If it were always easy that's all that I would do - buy overnight and sell early the next day.

So how do you find the right stock? - you need a stock that closes well above its low of the day. LEND is an excellent example - the last 45 minutes suggest that it is going up the next day. A buy there would have net a very quick buck and a half (depending on how long you wanted to hold it - you could have made close to 3 if you held till 1 P.M.) But would you have bought it again at 3:30? Hard to say, hard to say.

Same issue with NFI - it gapped down and then rose through the day on Wednesday. A purchase at 3:45 nets about 90 cents to a buck on Thursday - but do you buy again at 3:45 on Thursday? I don't know - I don't see any reason why I would have.

Maybe I would have bought LEND off this chart on Thursday -

But that's a BOB. So maybe if you buy a gap-up BOB you solve the problem.

Here is AHM another subprime mortgage company and another gap-up BOB on Thursday. It jumped on Friday but then came back - so you would sell off in the first 15 minutes if you see it falling.

I think this idea deserves a little more thought and a little more investigation. If a gap-up BOB generally results in a gap-up the next day then that would be a good way to play the overnight trade.

I'll take a look and see what obtains. Stay tuned.

1 comment:


Sounds like a sound move.