Waiting For October

I hate to keep harping on this theme, but recent personal experience has shown that the new month brings a new market. And boy am I thankful that this month happens to be October.

For one, September petered out with almost no momentum to speak of and I finished the last 10 days of the month with a -$4,000 drawdown, though I’m at least happy I was able to remain green on the month.  Second is the fact that the final three months of the year have historically been extremely profitable for me.

Finally, the proof is in the pudding, since I kicked off October with a $5,600 winning trade in Viveve Medical Inc. VIVE. That marks my best day in weeks and, hopefully, will serve as an early indication for what the rest of the fourth quarter has in store.

Of course, I had a similar hope for September, which saw opportunities fade as the month progressed.

Nevertheless, I thought I’d take this week’s article to focus on my successful trade in VIVE and look at why that trade gave some positive indications of the momentum we might be able to expect as we head into prime trading season.

Tuesday started with VIV as one of the top stocks on my morning gap scanner up 24% in the premarket and immediately looked like a good candidate. The stock ticked all of my boxes for a potential trade—mid-range float, price less than $10 and it was moving on a news catalyst.

But keep in mind I also prioritize a stock’s history of making big moves. And while VIVE certainly has a history, it also has quite a few instances of failing to follow-through on a move. Because of that, I was cautious about putting too much faith that buyers would support a big move while it was already up quite a bit on a not-very-impressive headline.

The bell chimed and VIVE just barely missed hitting its premarket high. Following that, I watched for the next one-minute candle to beat that open. Once it did, I took a chance and went in with a full order size of 9000 shares.

However, following the high traders started selling off pretty rapidly, so much so that I nearly got stopped out the low of the day at $5.40. Just as it tapped that level, buyers returned and the stock started to climb.

Seeing this, I suspected there might be a healthy amount of short interest in VIVE, especially given VIVE’s history. Because of that, the upward price pressure would only continue as the shorts scrambled to cover once the stock started approaching the new high. I added another 3,000 shares once it did and I was suddenly up nearly $1,600 in an instant.

After selling out of that position, I made a few quick trades for a couple of quick smaller trades for roughly $1,200 on the break above the $6.00 psychological level. After that, VIVE ran into more resistance, which meant more waiting for buyers. I started adding again in 3,000 share increments on the as it climbed above the $6.10 and selling off as it ticked higher.

All this time I’m always looking at the time and sales for buyers and where the levels of support are. I see a high concentration of orders at the $6.30 level and start adding once it breaks that level. Ultimately I made over $4,000 on VIVE’s initial move in the first 10 minutes of the day.

I returned for another trade after VIVE sold off a bit, but I am happy with how the initial break went. I exercised strong risk management, didn’t overextend myself and was able to kick off October in the green. Even though it was more hard-won than home run, the fact that VIVE was able to find enough buyers to fend off the shorts bodes well for the rest of the month.

Warrior Trading is a content partner of Benzinga