Trade Gaps Like a Pro
Solar city (SCTY) gapped up $1.51 (4%) on the open of Friday 5/17/13, allowing a potential gap-up trade. With gaps, one always considers if buying the stock will lead to a trend takeoff or to a head faking, gap fill. The daily chart showed an NR4 the day prior, and the trend was clearly up. But it was Friday, generally a low volume day of the week. The S&P 500 had not gone higher on the day, compared to the previous day's high, so maybe this would be a range bound Friday, and the breakout might not gain any lift.
Taking some caution, 100 shares of stock was bought on a 5-minute pullback at $38.50 (10:20 am), $1.30 above than the opening price. SCTY traded higher throughout the morning. By around 1:30 pm, the momentum looked overbought, so 50% of the shares were sold for a $360 profit (1:21 pm).
A stop loss was placed at $40.50 ($2.00 above the entry price) on the remaining 50 shares, locking in $100 of unrealized profit, no matter what happens. The worst the trade can do is net $460. The trade is now risk-free, and the 50 shares can make as much money as the trend will allow over ensuing days/weeks.
Done with this stock for the day. Monday may provide more opportunity.
Run profits, run!