How To Piggyback Big Moves


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Video Transcription:

Hello traders, welcome to the stock trading course and the eighth module: penny stock trading. In this lesson, we are going to learn how to piggyback big moves. And the big moves that we are going to be piggybacking are essentially earnings, winners, and a 52 week high breakout. And we’re going to go through one example that happened just a couple of days ago.

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First of all, we’re going to Finviz and I’m going to show you the chart. We are going to look at RITT, which is a two dollar stock. Well, you can see that it has an average volume of 139.5k, which is fine. And it’s a micro company with a market capitalization of only 31 million dollars. But if you look at the performance, it is saying it has gone up 37% this month and 27.56% alone this week. And it’s already up 76.11% of the year. So, this is a very nice company to be trading.

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And the reason we are going to be looking at this example is because of the earnings report. And here it is, our RIT Technologies reports second quarter, a six month result in 2015. So this report was released on September 29, and I have the report right here. So let’s look at the numbers. The revenue increased 172% to $4.5 million compared to $1.7 million in the second quarter of 2014, so it’s up 172% year over year. Gross margin improved 47% year over year. The net income was 1 cent per share, etc. So basically we do have a very nice hump in revenue on RIT Technologies.

So we go back to the chart. And we’re going to go to the actual chart on the thinkorswim platform to look at this example. All right, there you go. And you can see right there on September 29th we have a surge in volume up to 2 million shares. Of course, it’s going to be very difficult to trade the actual report, so what we’re going to do is we’re going to go and look at what has happened since the low at 56 cents. All right, maybe a little more chart, so we have a visual representation of what has been going on.

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So, the actual report came here, and you can see a spike in volume right here. The average volume is around 150,000-200,000 shares per day, and on this day on September 29th we had 2 million shares traded. So you can see the price moved from $1.44 to a high of $2.04, which is a 41% move to the upside, but it closed at $1.69. So basically, this was the earnings report. And what we want to do here is we want to piggyback this move to the upside.

Okay, so we are going to be patient, and we are going to look at the chart. First of all, let’s draw a trend line, from this low to this low. Okay? And let’s draw a price level right here at this level of resistance, okay? You can see that this price came all the way up here. We tested it once, then we tested it again and rejected it with this nice daily candle. And then on the date of the earnings report we broke to the upside. So this is one play, this is a breakout play. Then, we are going to wait for price to retest the broken level, and we also have a trend line. So this is a breakout play and a trend line play on a piggyback run.

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So this is a crazy, crazy, excellent setup around the 160 level with a stop around the 133 level. A mental stop, okay? We go long right here after these two candles. You can see that we break here. We made a dodgy then a bullish rejection candle and we buy here at the 160 level. And the price continues to move up. Right now RITT is about to break the 52 week high.

So just take a look at this. What you need to do is look for earning winners, look for that large move, then buy it on a piggyback, okay? Piggyback, piggyback it. Now, if you bought it at 160, right now we are at 208. You would be up around 30% on this trade.

Now, if we go back to Finviz, you can see that there’s still news on this stock. And I have the news right here. Tianjin City Rail Network utilizes RiT’s PatchView for increased service availability and operational efficiency. The PatchView IIM solution manages 6,000 intelligent ports used by 22 transit lines, which is huge.

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Here is another good use for RITT. And you can see that we have broken with the previous high and close above the previous high and we are about to break with the 52 week high. Now, if we go back to the thinkorswim platform, right now you would be up 30% with mental stop at break even. But if we go to a larger chart, we can start to look to take profit around the 224, 225 level. Then, take out the entire position at the $3.00 level.

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