The Fishhook Set up

Lately, I've noticed that there are a lot of stocks making some big moves.  I've been using a fishhook entry on these stocks with a lot of success.  

I was asked to explain the entry on INUV a stock, which had been on my August 30 watch list but I did not take a position in the stock.

 Here was the breakout day.  A nice 25% move.  At this point, it showed up on the scans I've been using to find these types of trades.

of course, on a stock that makes a move like this, which I have no history of following the question is always whether it will just pop and drop or whether it will continue as an "Episodic Pivot"

The next day it popped and then sold off.  At this point, many traders would stop following INUV.

The next day INUV starts to get interesting, the selling continued but it bounced and closed in the middle of the trading range:

The next day it again tested the prior days low and then traded up. A good sign, but still not a buy signal.

The buy signal: The bulls have returned, there was a gap a 10% move on increased volume.

The result: 18% on a very strong move, volume etc...

INUV is not a trade I took but it exhibited behavior that my Big Gain Hunting winners have exhibited.

ISNS:  Big move tests the move to the down side which fails twice and then boom!

One stock I did buy was CDXS, (entry summary): I bought on Aug 9 @ 2.13, It was the first stock I bought after creating my Big Gain Hunting training plan, so its not perfect but I'm obviously not complaining with the result:

I had nearly written it off when the initial surge closed at the bottom end of the range and then sold off the next two days.  Still, I kept it on my watch list.   One thing  curious happened, was that the volume stayed high for the stocks average and it started to slowly trickle up.   Now I recognize that CDXS has exactly been the explosive stock that we all hope to find but its hard to complain about the result.


Today I bought VEEV: Again big move, 2x times at trying to retrace to the downside and then breakout to the upside.  This would look more impressive if it closed at the highs but the market sold off.

In contrast to the charts above, most stocks that have a big move are one day wonders and will act something like this:

In LIME the retrace was successful and interest in the stock is now gone.  There was no entry where you could make money on the initial pop unless you were day trading.

Closing thoughts

The reason this pattern works is that it separates the stocks that are a one day wonders from the ones that have extended multi-day moves.  When the retrace fails and the bulls come in with some volume it shows that the stock is recapturing some of the mojo that caused the big move in the first place. Another  reason I like this pattern is that it provides a low risk entry into a potentially explosive stock.  Stops can usually be placed at the level where the retracement was tested.