How to Find the Best Stocks to Day Trade | Deep Dive into my Favorite Trading Pattern

in this episode I'm going to walk you through how a stock is able to go up over 400 percent in one day it happened today this is just the latest example this will be our case study of the pattern that is repeating itself in the market again and again and again and I want to teach you how to capitalize on it by showing you and explaining the ingredients the criteria for these stocks making these explosive moves so let's set some context here if the overall Market goes up 20 in one year investors are thrilled but naturally there are individual stocks that far exceed 20 in one year and of course there are stocks that underperform what we're looking for as active investors and Traders we're looking for the stocks that are outperforming and we're looking to trade them on the individual days when they're making big moves so what is It ultimately that creates this type of momentum It's News 95 of the time it's a stock that has really good news now the interesting thing here is that the stock that we're looking at today is our just latest case study this happens to be a biotech stock and biotech stocks are a real favorite among daily Traders like myself or day Traders if you'd like to call us that because when these companies have news that's good they can really go crazy a lot of biotech stocks they actually the companies are operating at a net loss all right so they're funded by investors who continue to put money into the company so the company can do research and development trying to find cures for different illnesses and diseases which is really a great thing and if these companies end up finding success with one of the treatments they're working on suddenly that makes them a candidate for a buyout right all of a sudden now they've got a product that's going to come to Market and the big companies the big pharmaceutical companies they'll come man they'll open the checkbook and they'll just buy out an entire small cap stock just like that and they usually do it for a really big premium on the current trading price so that speculation is something that drives a lot of momentum specifically within the pharmaceutical biotech sector but that's not the only sector where we see this type of momentum so if we start high level what we're looking for is a stock that has news and my goal for this episode right here is that I'm able to share with you the ingredients the Catalyst the the criteria that give way to these big moves so you can start to recognize this pattern that continues to repeat itself which means if you're recognizing it you're gonna start to learn that you want to participate in the action and so hopefully you're able to start to capitalize on this volatility because when a stock goes up 400 in one day I mean guys this is this is a huge opportunity naturally there are people that lost money on this it's it's certainly possible to lose money on this type of stock because it's volatile but if you're looking to grow an account aren't you going to be looking for something that's going up 400 in one day I mean this is what we look for I I don't trade stocks like Bank of America that go sideways a stock going sideways getting a sliver of nothing is nothing getting a sliver of something going up 400 percent well that's something I can work with so let's jump into the screen share I want you to look at this chart just for a second so high level we're going to start high level and then we're going to do a deep dive so for those of you guys who are brand new to the channel by the way let me introduce myself my name is Ross Cameron I'm a full-time Trader as you probably already know I've made over 10 million dollars trade into markets and those results well they're not typical while my experience has not been typical it does put me in the unique position to give you my opinion and share my commentary on these types of moves and I hope some of these tips and tricks I share with you help you in your own trading so let's look back at this uh chart here slno this is the stock ticker today and you can see basically the stock started squeezing up and pretty much never looked back it started at four dollars and about 50 cents and it went up to over thirty dollars a share and that's just in one day this is one trading session this is the move this is intense now I do have some live trading archives that I'm going to show and and share with you guys so you can watch these uh during this episode here some of them I've uploaded as short some of them haven't been published yet so for those of you guys that want to kind of really drill into the exact entries we'll do that in this episode as well but high level what happened was this stock releases news at 7 30. it's a biotech stock we've got our news headlines here at 7 30 a.m clinical trial clinical stage biotech said its lead pipeline candidate fared well in a study to treat a rare genetic disorder and I I understand why some Traders are like that's not it doesn't sound all that exciting but with these biotech stocks that is that can be enough so when this move first started you might ask Ross how in the world did you find this needle in the haystack this one particular stock today so this stock is the outlier for today it made the biggest move of any stock on the market today actually there might have been one penny stock that made a bigger move but in any case it was within the top two biggest movers in the market today all right so how did I find the needle in the haystack so what I do I use this criteria right here I know that stocks that have the potential to make the biggest moves have news but I know before they go up 400 percent they'll definitely be up at least 10 percent and they'll have high volume relative to what's normal which I'll explain more in a second they're usually priced between 2 and 20 and they typically have a float of under 20 million shares so what I basically I start my day by looking for all the stocks that meet this criteria right here and that is my scanner right here on the side so this is a stock scanner that I'm using to help me search the market for these types of stocks so slno was on my scanner basically immediately this morning but I'll admit I wasn't so sure about it at first so here was here was my issue when it first hit the scanner I saw it I saw that it popped up but I also noticed this big candle if you notice right here this topping tail when you have a stock that squeezes up like that and then gets pushed back down that's a sign of weakness so I saw that and I was like well I don't know if I like that and then it went red on this next candle which I didn't really like a lot either it bounces back up to like 660 and it does consolidate here for a moment before breaking higher but as it broke higher uh it again had another topping tail up here at about 726. so another one of those candles where it's kind of up here and then back down for some of you guys who are newer to the market I might already be going a little over your head by doing this kind of Candlestick analysis this is the way I look at and analyze a stock so my first order of business each day is using my scanner so my scanner searching for stocks that are up at least 10 right and basically what I do is I look for the leading percentage gainers I look at the leaders first because those the most exciting ones each day and this was the leader so at that time so I looked at that as the leader and I was like okay well what's the news I saw that there was news okay then I checked the volume and at this time the volume was a little light and that for me was what gave me pause because I thought well if the news is really good we're gonna see more volume come in but right now the volume is a little light so one of the things that I noted here was five times relative volume so if we look at the average volume of this stock on the daily we'll notice that yesterday it traded with 150 000 shares of volume okay so today has 40 million that is a huge jump in relative volume so it's average volume over the last several weeks is like 200 000 shares a day so ultimately as soon as it crossed over you know three four five hundred thousand shares at 7 30 in the morning it was pretty clear that this was going to be a day where the stock had really high relative volume High relative volume goes hand in hand with big moves so when you start to see the stock moving and you're seeing that high relative volume you learn these are the ingredients that can result in things getting a little exciting one of the other things I mentioned was the float the float is the number of shares available at trade and we have that listed here at 5.6 million so 5.6 million shares is a relatively small float for those that aren't familiar when a company does its initial public offering they sell shares onto the market and from that point forward that's the number of shares available to trade it's a closed market so every time you're buying and selling you're trading within that pool of shares so this represents the level of supply okay so this is our supply right here we've got Supply and then up here we have demand so ultimately when you have a stock that has a low level of Supply combined with these factors which create high demand that's when we get these explosive moves and and you can get these kind of moves really in any almost any type of stock I mean we've seen it before in energy stocks we've seen it in different types of tech stocks we've seen it in really stocks of almost every category so it's you might think that this is really exclusive to biotech or something like that and although biotech stocks do give us some of our biggest moves that's not the only sector that creates these these big moves so really the more important thing here more important than the sector is that imbalance between supply and demand so when you have a company and you know you have companies like Tesla that'll come out with good news but they don't go up 400 percent in one day right so they have a huge level of Supply because they've sold a lot of shares onto the market and they can make fairly big moves but they're not going to make moves like these small cap stocks so for a Trader like myself and when I came into the market my goal was trying to pull out a couple hundred dollars a day I found that it was more consistent when I focused on these types of stocks each day so I do not trade the same stock every day that's not my strategy and and I I know some people talk about that just get really good at trading Tesla and trade it every single day that's I I don't think that's a smart way to do it I think that's very very difficult I think what's easier and again trading is difficult but there's a spectrum I think what's easier is focusing on the stocks making these really big moves because again even just a small piece of 400 percent there's a lot of potential there so I found slno on the scanners and as I'm going through the chart I'm beginning to kind of break it down and look at the setups and I'm thinking okay you know this stock does have these topping Tails I'm a little bit unsure about it but what I noticed was it started to pull away and it started to pull away quickly as it broke over 750 it went straight to 8 15. and then it pops up here to 838 and then it goes up to nine and so right here you'll notice that it tapped 888 and then pulled back right in there just for a second that's called a micro pullback and that was where I took my first trade so I got in there right there for the dip under nine dollars and I took profit as it broke through nine and this thing as it broke through nine it went all the way to ten up to 10.49 all the way up to 14.59 so again just for perspective here this is a trade where I got in at eight dollars and ninety two cents right around there so ten percent on this is 89 cents this thing went up four dollars a share and then it squeezes all the way to 18. within four minutes this was really impressive however what is what is this candle tell us this candle is communicating a message so as Traders we're combining a lot of different things to make our decisions you know we're looking at what are our supply demand characteristics you know what what is the float what's the relative volume what's the news and then we're looking at the technicals of the chart what is the chart telling us what are these individual candlesticks telling us but these again these are all patterns that continue to repeat just like the characteristics the ingredients for a stock to go up 400 percent and that's the same that's a common denominator with all these big moves so as long as we have that we know we've got potential and then when we look at that daily chart we realize wow this daily chart uh it's got a tremendous amount of room there's really no nearby resistance at all and once it starts to get up a little higher there was this nice gap on the chart right in here okay so this is kind of where we ended up coming into uh resistance it was like right about here and we ended up being able to break through it and we knew once we broke through that level we had room all the way up towards 38 dollars that's a big window on the chart it was formed by a gap down a time when the company had bad news a couple years ago right but now as it's curling back up I mean it just blew through two years of selling from one news Catalyst today that's incredible so as I was looking at that chart this is where we got this topping tail right here so let me show you um I'll show you this first trade right in here okay so this um this is when the stock was still at the very beginning of its move ultimately I mean it's up 188 so it hit 14 and about 28 cents and then it sells off it dips down here to a low of under 13. now it's bouncing back up to 13.78 14 13 14 14 20. look at this Watch What Happens right here when this breaks the new high and it's breaking it right now Watch What Happens and this is where some early short sellers covered cover cover all of a sudden they're covering at 16. they're pressing the buy button they're covering at 17. they're covering it 18. the ask was 1836. now the thing that happens here usually a long biased Trader is not just going to be pressing bye bye bye bye bye up that high who's pressing by that high up usually it's going to be a short seller who sold the position hoping to cover it as the stock dropped but is now watching the stock squeezing to new highs as pressing the buy button to basically Panic out of the loss so they press buy and then there's not a lot of sellers because remember we've got a very uh the supply demand and balance is pretty extreme so what ultimately happened there I think was a little bit of a short squeeze some early the short sellers got squeezed out all right so we get that little squeeze up to 18 but what ends up happening is it pulls back we get this sort of dramatic topping tail candle and it drops all the way back to 16 on the bid right back down to 16 and then it breaks 16 and it goes there's a seller there at 16.53 now it goes to 15 just like that 1463. wow so you can imagine that this is an area that's a little bit hard to manage risk rightfully so so for long biased Traders like myself I got in a little bit earlier uh down around 1892 and then as it squeezed up I took profit and I was already out by the time it was making this big extension right so there's that topping tail that's that reversal candle as it comes back down so this ended up giving us another opportunity a little bit later which was interesting so early on some of the first moves on it were were a little bit difficult because the spreads were big we had a lot of volatility but we didn't have as much liquidity as I would like this was when things got a little bit more interesting when it curled back up right here because this occurred on higher volume that pullback right there let's see let's look at that trade I think I have that trade on here um all right so so right here it's starting to curl back up so in this area I started getting interested and I I'm sitting at 1200 on the day I take a quick trade there book a little bit of profit up to 1500 on the day goes up to 15.40 goes up to 16 goes up to 17. I take a little trade up here and now I'm up 2200 on the day and watch this does a near perfect double top remember the previous high was 18. this just came right back to 18. so we take profits it goes up to that level and then watching for a pullback so as it pulls back right in here I'm looking to take an entry for a break over 18. and let's watch this trade for a second so right here I've got my order entered for 1500 shares so what you're looking at here on this screen this is my my actual trading platform right here with real money this is the level two of the market so this is showing the stock with the buyers and the sellers and it's showing the orders that are going through this is our chart and the pattern that I'm working with is we had a double top consolidation that's called a cup and handle right so that's a cup that's the handle this is the long right here I added 1778 this is a pattern that I trade all the time so watch 1778 boom I get in right there I add for the break of 18 when it breaks new highs Watch What Happens straight to 19 on the ask 19 on the ask so you could say that that was about four thousand seven hundred fifty dollars a profit in perhaps three seconds based on knowing what the breakout price was I knew that if this broke through the high right here that we would get a big move and we got a squeeze on this all the way up to nearly twenty one dollars a share so that was actually my best trade of the day but something that I will remind you is easy come easy go if you thought that was a cool looking trade I'm going to show you a trade in just a moment where I lost about six thousand dollars in 18 seconds okay so this stock continues to be volatile again volatility is opportunity look at that squeeze there up to a high of 2419. all right so the Market opens it sells off and it once the Market opens we start dealing with circuit breaker halt so we Haul up we open low we sell off we pop up we drop down we halt down we Gap back up we halt I think we halted in here then we rip up we open we dip so we're getting into some chop I took a little bit of an aggressive trade up here for the break of 25 and see what ended up happening do you see this double top I thought it was going to break through right there and continue higher I ended up making a little bit of a heap of the moment decision which was the wrong decision let me show you this trade I'm going to pull it up here for you all right so um let's see all right so this was okay so this was my loss that I took on it this was the about six thousand dollar loss all right so let me show you this trade okay so here we go all right so so right here this stock is coming back up here to about 25 and as I saw it coming up I punched it right there and what I thought was gonna happen just the way it broke through 18 and ripped up to uh 20 uh 21 almost I thought that was going to happen right here I made a little bit of a uh risk error here which was that I took a little bit too much risk relative to the price of the stock now being at 25 a little more expensive and also relative to where I was at on the day it ends up not breaking 25 and we'll get how quickly it drops to 24 and to 23.26 and just like that in about 18 seconds I'm down five thousand dollars one of the things that's really important especially for beginner Traders is focusing on the highest quality setups this was admittedly a higher risk setup and I still I stepped up to the plate I took a little bit of risk and on that one I lost and that's the way it goes you have to be able to let those losses just kind of you know let them go brush it off it's part of trading it happens and move forward you you can't just keep uh dwelling on them that's not going to get you anywhere because here's the fact on this stock it ends up it hit a high there of 24 25 and then what happens a little bit later in the day a little bit later in the day I came back I said here we go boom we gotta trade right there on that break and that one gave two dollars a share up to 25.94 and then look it comes up again it goes up to 26. then it goes up to 27 to 28. pull back goes up to 29 almost to 30 and then right there it hits the high of day of thirty dollars and 30 cents learning to trade these stocks you know there's different different people will approach it in different ways some people are just going to take the approach of you know I'm just going to buy it and I'm going to hold it for a couple hours and let's see what happens I am much more precise I try to focus on chart patterns and I'm familiar with one of my favorite patterns is uh doing a pullback setup so it doesn't really matter what time frame it's on I prefer uh the one minute so the stock is squeezing up squeezing up and then it pulls back here pulls back here and I like to get in right at that price there that's my Apex that's my entry to ride the wave back up to the new high so stocks trade in these kind of rhythms they go up and then they get extended and they pull back and so our job is to try to time when is this going to change directions you know if you get in and it's still going down the Tide's still going out so it's like you need some little indicator that it's turning so I use a couple rules of thumb when a stock makes a big move up like this you know you've got a couple of nice big green candles I never wanted to pull back more than 50 of that move so if it retraces that much to me the pattern is broken pulled back too much we also use standard moving averages and well they're exponential moving averages not simple but they're just your typical moving average I I'm totally okay with the stock coming down towards a moving average but I don't want to see it break below the moving average that's another thing that's a that's a no-go so I don't want to see it Go below more than 50 I don't want to see it break a moving average and the way I time it I let it squeeze up I let it pull back and then the second this candle makes a new high right there that's where I'm getting it okay so by doing that I'm waiting for that first sign of strength now there's certainly times where you get that sign of strength that goes up and then it goes kind of sideways and comes back down all right so in that case I can usually stop out nearly Break Even or for a very small loss and those are that those are trades that don't work that's fine on trades that do work they continue going higher the area where Traders can tend to get more aggressive is trading the stocks at the highs this is when emotions come out so when I add right here for that high a day break that's a higher risk trade but with the high risk is also the reward potential that if we squeeze through that level remember how we got that squeeze from uh 14 to 18 and then we got that squeeze from 18 or 19 up to 20. and then we got that other one up to 24. when you start to get those types of big squeezes that that's the reward that justifies taking a little bit more risk I'm a big advocate for beginner traders to focus on of course trading the simulator before you put real money on the line and build a track record build a track record of consistency so first when you're trading a simulator you want to trade a lot you trade a ton because you want to gain experience you want to get good at reading the tape that order book that I was showing you you want to get good at seeing these chart patterns and what you want to do is you want to print out all these little chart patterns and put them all around your desk so you're seeing them while you're watching the market that starts to ingrain that pattern recognition into your brain that's what you've got to do and look I've been doing this for a long time I took my first trades with real money when I was in high school I'm 38 years old now so I've been in the market in one way or another for a long time and even now look at I still made a mistake today there's always room for improvement you're never going to be perfect but here's the thing this is a puzzle to me it's like a game and it's incredibly satisfying when you solve the puzzle because that's when you walk away with profit but it's not there's no real such thing as Perfection and I think that's something that's really cool about this because you can always try to get a little bit better so yes this happened today and if you're watching this tonight and you didn't trade it or you're watching this a month from now or a year from now you missed this pattern but focus on learning from the this example learn from the other case studies I have and keep trying to gain a little bit more experience so first you trade in the simulator protect yourself from losing any real money it's not worth it right and then you flip the switch start trading with real money but you focus on taking just one trade a day that has the highest probability of success less is more now what you're trying to do is put together five to ten green days in a row right if you can trade 10 days and do green seven of the ten that 70 70 accuracy that's really good that's we're starting to build consistency you're starting to build confidence and that's the beginning of your trading career so to get you from where you're at now to there that's your big milestone there's a lot of steps in between but I think it begins with understanding the criteria for a stock to make a big move like that learning to recognize the pattern starting to practice to see can you look at a scanner in the mornings like the scanner that I have here can you start to understand which of these stocks have the highest probability of making a big move do you think it'll be the one with a 50 million share flow or the one with a 5 million share float and this one is a little bit of an anomaly because it has no volume just FYI this is actually probably a reverse split all right so disregard that one because that's got a high flow but it's got no volume but once you kind of learn the pattern that's that's half the battle so learn to recognize which of the right stocks to trade if you're choosing the right stocks each day you're doing something right now even if you're not making money on them you're still doing something right because you're identifying the right stocks to trade now the question is what are the lowest risk patterns you could have taken a thousand trades on this today if you wanted I took more trades on it than I probably should have I could have been a little bit more of a sniper and just taken you know one good trade down here and and maybe been done for the day but here's the thing I like to say with trading you're always doing one of two things you're either leaving money on a table you're giving back profit today I gave back a little profit but I still end up finishing the day green which is great but you never know exactly the right time to walk away when the Market's hot sometimes you feel like you should push it a little harder when it's cold you feel like you should walk sooner so I get it if you gave back some profit today you know I get it I'm right there with you you feel like something's moving you should trade it more sometimes though less is more especially for a beginner Trader don't worry about how much profit you're leaving on a table your job is to get in and get green lock it up and come back and do it again tomorrow if you found this episode interesting there's going to be an episode right here that YouTube thinks that you would love so check that out and I hope you subscribe to the channel and hit the thumbs up if you found this episode interesting and I'll see you right here for the next episode real soon