Hit and Run Trading – the short-term stock traders bible [PDF]

Summary
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Hit and Run Trading – the short-term stock traders bible Book

Why does this setup work so well? My guess is that this is the classic example of, “Buy on the rumor, sell on the news.” The stock has been moving up because of the anticipated good news. Analysts and money managers were being whispered information about the pending good news and proceeded to run the stock higher.

When the news is finally released, the “in the dark” money is the last to buy. After these weak hands own the stock, the “in the know” money starts hitting the bids, taking their profits. This profit-taking usually lasts for at least a few days and sometimes longer. Also, in classical technical analysis jargon, this is in a sense an exhaustion gap.

The market makes its last final lunge before reversing. As I mentioned, Gilligan’s Island™ occasionally picks market tops and bottoms. Even though you may be tempted to hold these positions long-term, I would advise against it. Most times the setup works for a day or two and then the original trend resumes. I am much more comfortable consistently taking my few points off the table than waiting to hit a home run.