When Morning Panics Fail
What happens when the beloved morning panic dip buy turns into a failed bounce? So, today I decided to talk about when morning panics fail. This morning I had prepared for $GTII to have a morning panic based on Timothy Sykes 7-step framework (not sure what that is then click this link to learn!) As any other dip buy panic begins, I waited for the several red candles followed by the volume turn to indicate my entry.
As a side note: my laptop with StocksToTrade was uploading a video recap to Youtube which was taking up significant amounts of data so My STT warned me going in that there would be delays. Ignoring this warning I turned off some settings and continued to expect flawless performance.
While the panic began at 9:30am EST, my level 2 on StocksToTrade was delayed and so was my chart. Quickly, I turned off STT to focus my attention on Etrade; hoping that the internet wouldn’t affect those charts nor my level 2. Unfortunately, I didn’t see much stockage on the bid but I decided that it could be my connection and I place my buy at $3.95 as the stock seemed to bottom out in the $3.80 area and I thought the bounce could retest the $4.20 area. I was almost certain that the stop losses from $4.00 were taken out and it was safer to buy. I was wrong.
Now this is something I am truly learning to become better at. My entry turned out to be $3.92 and I didn’t realize. Nonetheless, I witnessed a weak spike as $4.00 test failed. I tried exiting at $3.99 then so on. Look at the image below to see how many times my exit attempts failed. This was party due to greed but also due to Etrade’s delayed confirmation window.
Soon after I exited my decision to post on Twitter read something as follows: When you try to exit for a quick profit – which turns into trying to cut losses quickly – which turns into managing losses – to seeing if the stock will bounce/managing risk – to trying to cut at risk and saying F-it Get Me OUT!
The above were the emotions I experienced when this Morning Panic Failed to bounce. Originally when I tried selling at $3.96 my thought was greed. I thought my entry was $3.95 and I wanted just a penny profit. This was Wrong! The right thing would have been selling below the bid at $3.93 which would’ve been safer and more rewarding.
After my failed exits my next thought was chasing the panic and trying to get out. Once those attempts failed my thought was ride out the rest of the panic as I have been in this situation plenty of times. The goal would be to sell into any spike ideally it’s close to my entry but potentially hold longer incase the real bounce happened. This is where I lost some perspective. The panic continued to the $3.60s and then bounced to the $3.80s. Ultimately the stock reached about $3.85 but I wanted more. My new risk level was $3.80 instead of risking $3.90. This time my sell was ready but my confirmation window on speed dial. Quickly I missed that sell too then $3.70s went out the door, so I said, “F-it Get ME OUT!” I was then out on the bid at $3.62.
My losses added up to about 7% which is WAY past my 3% MAX on panics. This was a very important rule that had slipped my mind.
Ideal Bounce vs. Failed Bounce
Below is an image on $HMBL formally known as $TSNP/$TSNPD.
This is the screen shot I took of $HMBL morning panic dip buy. Unlike $GTII which was a good example of when morning panics fail to bounce (yes I know $GTII did go from $3.60s to $3.90s but it was choppy and the overall trend was down), $HMBL had a clean panic and a nice 3 minute bounce which even provided a higher low and a continuation bounce.
Take note of how this chart is cleaner than $GTII which was overall weak sauce.
So why did I choose to enter into $GTII instead of $HMBL? First, I couldn’t get $HMBL charts to load after they changed tickers which caused it to fall off of my radar. Simply, I didn’t see $HMBL. Due to my ignoring the warning signs on STT I became stubborn and forced $GTII which rightfully humbled me (no pun intended – get it? Humbled me because $HMBL! LOL).
How To Recognize When Morning Panics Fail
Now, many of you will probably ask me.. “How did you know $GTII was going to panic further instead of bounce?” First, that has been a common trend with panics lately in OTC Land. The bounces have been iffy and most have been all day faders such as the $GTII example above. I decided to try the panic dip buy because it was too nice of a daily chart not to. Today I missed the afternoon panic on $LTNC due to running more errands.
Basically you’ll noice trends. Like I just said, a common theme for panics lately have been the all day faders but it doesn’t hurt to try as long as you CUT LOSSES QUICKLY! This is especially so on Morning Panics as you can see. Above you saw I mentioned that I forgot this rule. Now my max loss for panic dip buys should be 3% MAX and that went out the door. Mostly my error but Partially software/internet.
Moral of This Story
The point I am trying to make is when you dip buy a morning panic and you recognize that it is failing, get the F OUT! Cut it because it can continue to go lower. These stocks do NOT have to bounce. Also, with panics you are usually rewarded instantly which can be another sign that the bounce is weak. Study the images above and you’ll see the difference. Also, I recommend opening up a Think or Swim account and use the “On Demand” feature to replay the panics and really pay close attention to the level two to improve your skills reading the panic/bounces.