I See Momentum Buying

BellaGeneral Comments2 Comments

I settled at my trading station wondering what to trade on this Open.  RHT? BBY? AMLN?  There had not yet been a price spike on the SMB Radar in health care yet but I would later ask what and where to buy for that sector.  BBY showed some consistent selling at 25 so I scalped that down to 24.60 on small size.  What to trade?  What to trade?

I loved the AMLN Second Day Play near 23, an important level from yesterday.  Yesterday AMLN was In Play, could not get above 23, and then did with a nice push in the closing hour.  A pullback to near 23 was an A+ Second Day Play.  I placed a bid at 23.03 and just missed a fill.  AMLN touched every price save my bid.  I had that feeling that I am not a part of the market place.  Later I bought 23.38 and am just holding now.

RHT was the real winner of the Open.  I found a way in.  At one point I was the only one long RHT in our firm and annoyed asked,”Can anyone please tell me why you are not in RHT?”  Then I tweeted:


if you are an intraday trader and not in RHT
today you ought to ask why

I saw momentum buying in RHT this open.  Offers were sprayed.  This is an unusual sight on the tape in these market conditions.  Usually funds and institutions have passive buy algos to accumulate stock.  They place a bid and wait to get hit.  If they don’t then they pay the offer and slowly step higher.  They wait to get hit on the bid and if they can’t then they pay the offer.  On this Open in RHT I saw “old school” sloppy buying.  I saw momentum buying.

Momentum traders find a good story, in a strong stock, that is acting well and drive it higher.  The trade works until it doesn’t.  But the idea is for the momo traders to control the stock higher so it can exit at much higher levels for a solid gain.  They are not that concerned with price at a given moment.  58 is bought because 57.80 was bought.  58.50 was bought because 58.30 was bought.

Where to get in can be challenging when a stock gaps and goes.  I was asked on the stream where to buy RHT this open.  I responded:

smbcapital @ALSITRADER

i am not helping you as a trader by giving you the entry or exit for
RHT that is up to U and Your trading style

The pattern I have noticed throughout my trading years is that when you see this type of sloppy buying on Day One, the day of a significant news release, there can be substantial follow through.  You remember back to when you thought the buys at 58 were hyperbolic and shake your head that you are not longer at 68 a few days later.

This is not a call that RHT will trade higher.  That is not my game.  1) This is a hint to take notice when you see sloppy buying during an intraday.  There is much upside intraday when you see such a buying pattern like in RHT on today’s open.  2) Keep an eye on RHT for the next several days.  If you can find excellent risk/reward opportunities, 58.60?, there may be a swing trade to consider based on your trading style.  3) These plays can end badly.  So for those who fade this also ought to be on your radar.

I am not sure where RHT is heading over the next 3 days.  But I am interested.  It has brought opportunity and with a pattern that historically breeds further opportunity.  And on both sides.  I see momentum buying.


One Good Trade

long AMLN
long RHT

no other relevant positions

2 Comments on “I See Momentum Buying”

  1. Hi Mike and thanks for this post.

    Must be honest what you said there is just experience talking from you. I’m checking this chart over and over again today and will probably go into my folder of great play saying that must if you check even 1min chart it would be very difficult to get into stock, maybe coupled with pre-market action only. 

    I manage to get in around 58.90 (11h50) after 58.60 held for some time, and still riding it. Will probably look to keep it till close.

    Thank you very much for explaining your process around RHT this morning. 

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