Cut down the number of setups. Just focus on first red day. 

 

That's it. One setup. Stick to it.

 

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First Red Day

 

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1. The pattern requires that the trader start to look for short opportunities on smaller time-frame charts when the stock exhibits its first day of selling after a large run-up.

 

First-Red-Day charts: http://www.famousdaytraders.com/index.php?title=First_Red_Day

 

2.  Look for daily chart overextension:

 

Daily overextension explained:

 

- Judge from breakout point

 

- Multiple consecutive green days

 

- Large % run relative to prior action

 

3. Short into the close (3:45 - 3:50pm)

 

4. Cover into the morning panic. Tweak your plan based on price action you are seeing. Sometimes stocks spike in the morning and then collapse. Watch support levels for breakdowns

 

5. It's an overnight play

 

6. Look for stocks that have a history of failing -- on day 3 or 4

 

7. When the stock fails to go below a key level *convincingly*, then that makes the stock a buy