So, while the market is busy being not busy, I am trying to hone my dip buying skills, so I'll share all my insights on preparing an actionable watchlist for it, recognizing bottoming action & executing and managing the trade.

 

Watchlist Building:

I think pennystocking framework is key to recognizing a coming crash, after a lot of green days, overextension & volume exhaustion will be key to an imminent crash. When those factors start to align I look for technical meaningful support/resistance zones where the crash might end at. When I say meaningful I mean around $ levels and where the support/resistance zones have a lot of volume & are tested many times before breaking ideally. Then I put them on my watchlist for the coming days until they crack, remembering those price levels.

 

So, when the crash is on, what do I look for?

Ideally, before even consider buying I want it to drop 10-15%+, then after a bunch of 1 min candlesticks I start to look at those technical zones I mentioned earlier and see how level2, time&sales and volume start to behave around those zones. I look for a "hammer" type candle where after a bunch of BIG down candles, you see a small red candle, much smaller, like the stock starts to drop less in 1 minute intervals, starting to turn & not pure panic selling anymore. When that happens I start to focus on level2 and look for MM's to start hitting bids with huge size compared to MM's on the sell side. This will lead to a big volume candle on the 1 min chart because of all the buying going on. I also look for prints going trough the time&sales table ABOVE the best ask, witch indicates dip buyers want to get in at any cost, putting limit orders above the current price to ensure a fill, thus supporting my thesis that the stock is now into "bounce mode".

 

Now, when I get to actually start trading these, I will add info into how to manage the trades. But I would risk the low of the dip, if that cracks, sell as fast as possible, even if it kinda holds there for a moment, because if it doesn't start bouncing after a bit, that indicates there is no bounce or there will be, but at a lower price. For profit targets I would use mainly level2 to see where sellers start stacking up again, ideally for a 15-30% gain.

When getting in, I would probably have the limit order ready and just change the price when I want to execute it, sending it faster so I can get executed.

 

Thanks for reading, as always, if you found it useful, give me a karma on the post & if you have any questions feel free to comment down bellow.