It’s a lot easier to sit on your hands and stay patient when you’re a seven-figure trader. 

But even if I wasn’t a millionaire trader, I’d still approach the market the same as I am now.

If you only focus on making money all the time, it can only lead to bad things — overtrading, trading scared, chasing plays…

That’s why you must focus on your process first. 

For me, that means finding setups in which the risk/reward leans heavily in my favor. 

Today I want to talk to you about an example of that exact kind of setup…

And explain the mechanics behind it. 

I’ll use my latest trade on HOOKIPA Pharma Inc. (NASDAQ: HOOK) to help illustrate. 

Read on to discover:

•  How I found “safe spots” to enter
•  How the risk/reward was in my favor
•  The tools and indicators I used to gain conviction in the trade

Here’s what it’s all about.

Support Dip Buy

The whole idea behind a support dip buy is to identify key support and resistance levels on a hot stock.

Support and resistance lines are imaginary barriers that stocks like to bounce between. Sometimes they break through to move higher or lower. And that’s how I make money off of them.

I’m going to show you an example of support and resistance on HOOK’s chart. But first, let’s understand why I was watching this stock in the first place… 

Hot Stock

I only look to dip buy stocks that are in play. Here’s what I mean by that… 

• High volume. This means a lot of traders are actively buying and selling. The stock is popular. The volume has got to be a couple million for me to make a trade.
• Percent gain. Stocks that have spiked can keep spiking.
• History of running. As you’ll see, HOOK ran for a few days before I played it.
• Catalyst. There needs to be a reason for the move.

Look at this chart and you’ll be able to see the volume, gain, and history of running…

And it spiked in the afternoon of February 15, 2022, on an immunotherapy licensing agreement.

This stock had everything I needed to make a play … except a safe entry point.

Where to Buy

Technically, I’m still in this play so I can’t tell you details about how much I made or lost.

But let’s go over the buy point… 

Look at the chart again. Try to use your day trading eyes to look for levels that the stock bounces between.

The most obvious line I saw was right around $2.40. I drew a green line where it is on this chart… 

See how the price set a high at that level on February 16, 2022? Then on February 18 it tested those highs and broke out.

I bought in the low $2.40s when it came down to bounce off that line.

The idea is to sell into that morning spike as it broke out to new highs.

Don’t hold and hope it goes higher. Control your greed or the market will humble you. This stock gave back all its gains from the morning. It may bounce back off the $2.40 level, but it might not. 

You’ve gotta protect your gains.

The best part is, I know when to sell if things take a turn for the worst. The pattern tells me that $2.40 is support. If the price falls below that level, I’d cut for a tiny loss.

Learn to Trade Like Me

The best way to learn this skill is to watch a professional do it live.

Trading isn’t an exact science. There’s definitely an art to this. The more you practice the better you’ll get.

Lucky for you, my mentor and millionaire day trader Tim Sykes will be hosting an all-day free webinar tomorrow, February 24. We’ll get to watch his screen while he trades and hear his thought process. It’s the trading opportunity of a lifetime.

Sign up for Sykes’ live trading session — and more — today!

See you there.

Don’t miss out,

Roland Wolf

Editor, The Wolf’s Den