A while ago, I had written a series of posts on the mentality behind chasing gap ups and how to play them. I quote from Pat 3 of that series:
"If the stock gaps up above an important resistance, wait for a successful test of this resistance, which has now become support, and then enter the stock. For example, the chart was forming an ascending triangle until yesterday and today gaped up above the horizontal line, wait for a bounce off this horizontal line before entering the stock."
Well, let's look at the chart of ATPG, a stock I had mentioned in the watchlist yesterday saying that there was a high probability of short squeeze happening here. This is the chart at the close yesterday. I had marked on the chart that 12.75 was the important level here and the stock could run if it crossed that level. The stock closed at 11.99 yesterday.
And this is the chart after today.
The stock made a low of 12.72. As soon as one saw it successfully testing the support at 12.75 (which was resistance yesterday), one could have got into the stock without fear despite the huge gap up.
The stock closed up almost 16% today. I rest my case. Take care and good luck!You can follow me on twitter to get the latest blog updates.