Small priced, low float, pump and dumps, and supernovas. These are some of the terms you might here when seeing stocks that move like this. These are typically shady companies with small stock floats that usually trade below $1, but anywhere from $1-4 may qualify. These companies do very little in terms of trading shares and price movement. However then comes a new piece, usually not significant, or a pump up from someone, or maybe there is no catalyst at all. And following this, the stock goes supernova. The low share count of these stocks makes it easier for large players to manipulate and drive the stock higher, making it a momentum scalper’s dream, but also a nightmare to those who aren’t experienced in trading them.

AWX is one of the most recent examples of this. First, let’s show you the daily chart of the move we are talking about for those who don’t already know of it.

Yeah. And that isn’t even showing premarket prices. Now let’s see how high this went premarket.

Yep. This baby went crazy, as many of these stocks have done in the past and will continue to do. Now obviously with these moves can come a lot of trading opportunity for you day traders who like these hyperactive, fast movers. Now many times the stocks will have a news catalyst that may drive them higher and bring traders’ attention to the stock. Things like winning a contract, patent disputes, court rulings, new products, investments, or even just shifts in what they are making (we are looking at you blockchainers). However, AWX really did not have any news releases prior to this move. It just kind of started moving. And the more it moved, the faster that pace quickened as more traders started trading it.

The First Wave of Moves

Let’s look at the charts and potentials of the trading prior to the largest move and following downmove.

So this is a more reasonable look at what many of these low float runners do before they top off. YES we know that this is looking back in time and trying to analyze the best entries which is monday morning quarterbacking, but looking back through these and identifying patterns will help you find better entries the next time around.

As we can see this upmove was more controlled and choppy, with a gradual rise with pullbacks and spikes along the way. There was a pretty decent trendline that the stock could not hold above as it grinded higher. Keep this trendline in your mind for later. It is also important to note, for you people that may have watched this over the three days and were trying to short it while it ran, that it never managed to break premarket lows. This is a pretty big deal to many because the fact that it can’t do it, shows that the sellers were never really in control. Now trading these may require a fair bit of anticipation because when they do break, you need to be fast in many cases but regardless. There was never enough selling pressure to make you think this thing was ready to go down.

Some possible trades in this, and there are many many trades in this depending on who you are as a trader, are noted by some arrows. Buying these for an overnight gap can work if the stock finished strong. So for example that first Tuesday that the stock moved higher on. The stock closed at the high of day. The momentum is strong and there is buying into the close. Although not always, there is a chance that this buying strength translates into a gap higher overnight. And we got that all 3 days the stock closed near highs, and even on the day after as well. However keep in mind that the higher this thing goes, the more risk you carry taking a position overnight because there is more room for it to hurt you if it does gap down. All it takes is the stock to announce a secondary or a news piece and that stock can tank overnight. Also you run risk of a stock being halted by the exchange if it is really nutty so be very careful with holding these for long. It is considered a more intermediate to advanced move. One of the other trades you could have taken is buying the breakout to new highs every day for a scalp. Anytime that stock broke the highs marked by arrows it continued higher. This does not always work but watching a stock trade as it approaches the highs can give you better insight into how it is behaving into that key level.

The Big Premarket Move

There is what the stock did on that big blowout day. And it did it all premarket and after hours! So sometimes some of the best price action may be during the extended hours. Now how you decide to trade moments like these varies per trader and we won’t dive into that. What we will cover about this day is leading into the open. You can see that selling pressure going from about 8 AM est until the open. That stock topped at 36 but opened around $24! That is some heavy selling pressure into the open. Now many traders love the profits shorting these back down. If you like doing this you need to make sure you limit your risk because who is to say that thing wouldn’t rebound on the open and go to $40. We have seen many traders get blown out by being stubborn in their shorts.

But that selling pressure provided a good idea of which direction you may want to be biased in when watching this stock for day trades. And it had an immediate opening flush as Longs panicked out and took profits quickly. There were some dip buying chances in there. But largely at this point after that opening move, most traders can smell blood in the water and most traders are looking to short pops (with caution). And you can see that thing grinded down the rest of the day. And as you will see, it continued lower in the days following. So once a momo stock like this is broken and the momentum is no longer to the upside like that, chances are it is done its’ move for now and you will have a few days of selling pressure. There can be some more pops in there but for the next few days, the sellers are in control. As we show you below.

So while these plays can be very fun to watch and can provide a lot of opportunity for day traders, they all come with their own new and extreme set of risks. Fast moving, illiquid stocks can slip you fast. Some may be halted by the exchange and open back where they started, absolutely crushing longs. It all depends. One other thing we noted is that according to a few seeking alpha articles, the company came out during this move and disclosed a large investment by MintBroker International. They said that MintBroker owned about 60% of its’ 3.19 Million outstanding shares as of May 4th (prior to this). That is a big deal! That means there are even less shares out there in the average traders’ hands and this thing can really move! And MintBroker controls a large portion of this stock’s float. Now we don’t know what they did with their shares or if they were even involved in this move, but this is something experienced traders will take note of when they decide to trade this stock.

We aren’t telling you how to trade these, or even that you have to, but rather they are worth studying because patterns repeat themselves and traders can make and lose money both long and short during these moves. It all depends on having a trading plan and respecting your exits and entries and doing the necessary review to improve.