Did you see Eli Lilly (LLY) trade today? This was a classic “59 Minute Trade”, and I’ll show you the setup. (November 23, 2016)
LLY
Lets look at Eli Lilly ( NYSE:LLY ). The company reported that their Alzheimer’s drug solanezumab failed the final stage trial, so this might be kind of a dead drug. So what happened? This morning the stock gapped from 76.00 clear down to almost 63.00. As I am recording this video the market is still open, but I just kind of wanted to get it out to you. The stock is up quite a bit, we still have a little over an hour left to trade. But I wanted to show you how this day trading can work and really work for you. Lets go to a 5-minute chart. This was where the stock opened up this morning. It almost, but not quite, immediately started moving higher.
The reason I am pointing this out to you is, we had a lot of members in our forum today, and I was one of them, that were making this trade. I had suggested that the stock was down about 15 percent; you want to be a buyer of a stock like that as long as you have good risk management. Sure enough over the next hour or so, this is about 10:30, the stock kind of peters out. Now ultimately it moved higher after lunch, but for the first hour or so this was a pretty good trade. So what we did was, we bought at the open, a little bit after the open. But if you look at the stock, how it trades pre-market, you can see that it had already hit around 64.50ish. It went a little bit below that and then basically held. I actually bought some shares before the open. Not too much, but I just kind of wanted to get a little head start on it just in case I was right. And if I was wrong, small position, small loss, too bad, so sad, we move on.
So I was in a little bit before the open and then started building the position. As long as the intraperiod lows here were higher than the prior ones then it is all good. At the first sign that this dynamic had changed, and there were a couple times when it was actually very close. At the first sign that this dynamic changed I snugged up my stops quite a bit and then ultimately sold somewhere in here, not right at the top of this move. Though we did have a couple members sell literally within pennies of the very top of the move, and nice job to those guys. Not my recommendation, because in my view, if you are selling too close to what turns out to be the top maybe you were probably a little bit greedy.
So my point for bringing this up is, #1, you can make money day trading. You just don’t want to trade all day. You trade maybe during the first hour, maybe even the first half hour of trading, on these big movers. And sometimes they’ll be a big mover out of a volatility squeeze. Other times they’ll be big movers out of these big, huge key breakdowns like this. So you can make those trades if you just have some discipline and, frankly, a process for doing it. Watch for these big moves, because a lot of times you will be able to make money taking the other side; as long as you have got discipline and a risk management plan.
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