Some of the best long-biased trades come from stocks that are well off their highs. Like my trade this week on a popular defense stock…
We don’t have to find stocks that are spiking to all-time highs to take massive gains.
The trick is knowing when the momentum is about to turn. A bounce trade can be just as powerful as a breakout.
Too many people get caught trying to find the next moonshot stock spike.
But there’s so much opportunity in the stock market. With short dated options, every bullish bounce has moonshot potential.
The percent change is exponential compared to the actual percent change of the underlying stock.
The Exhaustion Bounce
When stocks spike too high, they eventually pull back, at least momentarily.
The same idea applies for stocks that fall too far. Even if the selloff resumes, there’s a moment when the sellers get fatigued and the stock bounces.
The trick is finding the right stock and getting onboard at the right moment.
My RKLB Trade
Due to the unfortunate and ongoing war in Iran, defense stocks are back in focus.
Headlines from earlier this week detailed an escalating conflict:
Rocket Lab Corporation (NASDAQ: RKLB) is a popular defense play, considering most wars are fought with rockets and drones these days.
And in the morning on September 3 I noticed the stock was trending up after reaching a multi-month support level.
Pay attention to the premarket and morning price action intraday on September 2, that’s what I saw before alerting the trade:
Here’s my alert from the early afternoon, when RKLB was holding intraday support:
“Idea: RKLB
Sector – SPACE – ROCKETS
Good Risk Reward idea for a:
Exhaustion bounce from previous support.
Targets: $65.50, $70+
Entry: $62
Stops: $58.70”
And my official entry a few minutes later:
“RKLB OCT 16 $70 calls”
Here’s my trade overlaid on the intraday chart:
An exit into the afternoon or even on Thursday morning would’ve paid BIG.
These sleepy bounce trades are all over the place.
- Focus on hot sectors.
- Find charts with multi-month support.
- Identify an early intraday uptrend.
- Wait for the stock to reach intraday support.
Start practicing, paper trading, and drawing lines on your chart. I’ll see you on September 15 for the LIVE trading bootcamp.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
