This morning I was alerted to a small biotech stock breaking VWAP.
Vivos Therapeutics (VVOS) started its move upward premarket on news that it got FDA approval for its treatment for sleep apnea.
You can see its movement in the chart below…
What happened during the day was nothing short of insanity.
As of this time of writing the stock was halted 11 different times throughout the day.
That means that the powers at be put a kibosh on anyone buying or selling the stock until they figured out what to do with it.
Stocks can get halted for several reasons including the Feds stepping in to investigate, or in the anticipation of significant news on a stock.
One of the most common reasons for a stock to be halted is what’s known as a circuit breaker.
Like in the case of VVOS today, there were just too many buy and sell orders on the stock for the market to react properly.
Halting the stock allows the market to catch up to all of the orders coming in.
The problem with trading halts is that you have no idea what price a stock will trade out once it comes out of a halt.
It’s a tricky task trying to trade stocks that are halted.
But with discipline and setting proper rules in place, you can navigate the markets like a pro.
First, when dealing with halts, you will want to write these steps down…
1. When a stock is halted, set a hard stop at the bottom of the previous candle
2. If a stock comes out of a halt and gaps up, sell a little bit of your position (e.g. 1/5 at a time) and repeat step one setting your stop at the previous candle.
Seems simple enough right?
It is until you actually get into trading it.
The volatility when it comes to trading halts is huge.
So when it comes to both steps you want to be disciplined and stick to what’s going to ensure you profits.
For your profits you’ll want to set your limit ahead of time to dump part of your position, so if you get into part of the move up, your order can get filled.
Sometimes a stock gets halted, comes out of a halt and it’s only seconds before it’s halted again.
Traders are champing at the bit to get in on the action.
So let’s put these rules into action with our example VVOS today.
Take a look at the image below…
Notice the gaps in the chat here between candles.
Each gap is an indicator of halts on the stock.
When coming out of a halt, you would continue to move up your stock to the bottom of the previous candle.
And then, in our case, we sold a little bit of our position higher if it goes higher.
If it stops us out, it’s no big deal.
You have yourself a winning trade as long as you don’t get stopped out below the initial buy price.
VVOS today was able to soar to $2.96 from the initial VWAP break at $1.14.
But know that it could have hit only $2.00 and could have come crashing back down to below $1.00.
You need to be careful when trading halts. And you need to be quick.
If you see a stock ripping upward, don’t panic and don’t let it go up without you taking profits.
There’s always the chance that it could roll over and die, and you don’t want to be holding the stock if it does.
January 04 2023