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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Wallace Rivers who wrote (5937)3/12/1998 2:30:00 PM
From: LastShadow  Read Replies (2) of 120523
 
AMGN and other gappers

Any high volume, mid-volatile stock that gaps is best played using a mid-morning boundary strategy (I just call this my Gap Strategy for future reference). Basically one does not play the stock during the first 1.5 to 2 hours of the day it gaps. You look at it about 10:45 and set a buy stop a couple of ticks above the morning high, and a sell/short stop a couple of ticks below it (or ignore the short if you are not familiar with doing that). Then, if the stock just settles in between those two ranges, you never enter. If it rises above the morning high you get filled and then look to exit at end of day or at the first leveling. Similarly, if your short stop gts filled, you also look to enter end of day or at the bounce - this isnt recommended for non-daytraders though. If you filled on th buy you may wish to hold overnight if you feel the stock has momentum, that the selloff took out enough traders, etc. That is a stock-specific call.

In the case of today's AMGN, one's short would have been filled and needed to be covered within a few minutes, ergo a daytrader's pick. The better method would be then to go long on the bounce under a SAR (Stop and Reversal) strategy - esentially being either long or short on the stock all day - from the looks of the intraday chart that would have been good for about $2.5 today. Not terribly impressive for a $60 ticker that you had to stay glued to the screen for, IMO.

A simpler play is to just short it at 10 am as it started lowering the bid and ask and buy to cover and buy at amrket at lunch when the bid and ask started improving for $2.00 profit. A lot less work and something that can be done looking at delayed quotes even.

lastshadow
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