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This Strategy Creates Both A Good Day Trade & Swing Trade

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This Strategy Creates Both A Good Day Trade & Swing Trade

T3 Live and T3 Trading Group Chief Strategist Scott Redler says his one of his favorite trading strategies is the Red Dog Reversal.

He recently joined Benzinga’s #PreMarket Prep to talk about why the strategy makes both a good day trade and a good swing trade.

"It's a pivot level that I think is pretty emotional where you break below a prior level after a multiple day direction lose in that direction," Redler said.

He said that some people think the direction will continue lower, so they are shorting below a prior day’s low, while others will try to play a bounce.

"So, when it trades through a prior low and then comes back above it, it creates a great actionary, because shorts are trapped and guys that were long just got stopped out, so they want to get back in," Redler explained.

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He pointed to last week's bottom for the Market Vectors Oil Services ETF (NYSE: OIH).

"It did a red dog reversal on Wednesday. It broke below Tuesday’s low [and] came back above it on Wednesday. So you bought once it came back above Tuesday’s low," he said.

On Wednesday, the sector was actually performing better than the S&P 500, Redler said, so it showed a little relative strength.

The next day, when Dennis Gartman and other financial pundits went on television and said that this is a bad market, he said the sector pulled higher and has had a nice move since.

"It was a great day trade that day if you bought it at that level, and then it was also a good swing trade if you said ‘I’m not gonna sell it unless it breaks Wednesday’s low,’ which it never did," Redler said.

Check out his full interview here:

Don’t forget to tune in to Benzinga’s #PreMarket Prep Monday-Friday 8-9:45 a.m. ET all of the premarket info, news and data needed to start the trading day.

 

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