Building a Watch List On the morning of June 2, 2016, before the market opened, SRPT hit my watch list scanner. It
was gapping down 14.5%, had a relatively low float (only 36 million shares, which meant the
stock would move a lot intraday) and a high Average True Range of $1.86 (which meant the
stock on average moved in a range as large as $1.86 during the day, which is really good for day
trading).
My watch list at 6:15 a.m. (9:15 a.m. New York time) - SRPT is on my watch list.
Trading Plan (entry, exit, and stop loss) I looked at the chart and decided to wait and see the price action for 10 minutes at the beginning
of trading. When the market opened, I saw that the buyers could not push the price any higher.
There was no interest in buying back the stock. Therefore, I decided to do a VWAP trade. I
monitored VWAP and price action around VWAP for two 5-minute candlesticks. I realized that
the sellers were in control and that the buyers could not push the price higher than VWAP and
hold it. I knew it must be a good short with a stop above VWAP.
5-minute chart on June 2, 2016. Market open ed at 9:30 a.m. New York time.
Execution After 10 minutes, when SRPT closed below VVWAP, I entered the trade by shorting stock
around $18.20 with a stop loss in mind just above VWAP. As expected, the sellers took control,
and the stock price tanked to $17. I exited when a new 5-minute chart made a new high. When
the candlestick made a new high, it meant that the buyers were then gaining control. I covered
my shorts at around $17.40 and locked in a $650 profit, as you can see below.
