As I was live streaming to my accelerator students the other day…

…a primo setup came my way. 

Now, I didn’t take the trade, but I want to go over it with you.

Why?

Because I think this setup makes a lot of sense in this market. 

And I want to make sure it’s crystal clear for you, too.

Next time this setup presents itself…

I’m pouncing on it.

Here’s what it’s all about…

Kaival Brands Innovations Group Inc. (NASDAQ: KAVL)

This stock has been running for a few days …

It’s been on my watchlist ever since the news on February 3, 2022 …

But the play I’m talking about happened on February 15, 2022.

There wasn’t any more news, but considering its strength over the last few days, I liked the idea of a day trade.

Especially in a choppy market like right now, I’m not looking to hold overnight — I just want to make safe and quick profits.

Here are the basics of the ‘breakout’ pattern I saw: 

• First the stock spikes and sets a HOD…
• Then it dips and consolidates below the HOD…
• The price then climbs back up to break out over the HOD. 

Boom. That’s it. It’s a pretty basic process. But you’ve gotta know when to buy or you’ll get scared out. So let’s take a look at that. Here’s what I saw on $KAVL…

Dip Buy

First, we’ll take a quick second to discuss risk/reward.

Before making a trade, figure out how much you’re willing to risk. And you better have a plan to take profits (reward). It won’t keep climbing forever.

If the pattern fails, I cut losses before they pile up. But things happen fast in this niche, so trading with a plan is essential. Don’t go out there and wing it. You’ll get creamed.

Check out this +20% morning spike. You’ve gotta be smart about when to buy and when to sell.

Stocks like to bounce between whole numbers. They’re called ‘psychologically significant’. That means whole numbers often act as both support and resistance.

In the chart above, you can see the price push through $3 but then slow down and bounce off of it to break out and climb higher.

The bounce off of $3 is the dip buy opportunity I saw. A quick 10% gain on a hot runner.

I would buy shares right above $3 and cut the loss if it breaks that level. So $3 is my theoretical risk.

I’d hope to take profits after a successful breakout — so anything above HOD works.

These are the kinds of plays I’m looking for right now. We’re in a choppy market, so it’s best to stay safe.

More Winning Patterns

Listen to these words … 

Identifying winning patterns will keep your head above water.

Now, if you’re still trying to learn which setups and opportunities are right for you, then I encourage you to keep learning.

Try to have an open mind, the markets are constantly changing, which means you need to keep up if you want to advance. 

One way to do that is to study what other successful traders are doing. That’s why I’m excited to attend Tim Sykes’ latest training, with legendary trader Chuck Hughes. It all goes down on Tuesday, February 22 at 8 p.m. ET. 

Take a moment to sign up here now!

Prepare for war,

Roland Wolf

Editor, The Wolf’s Den