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Criteria For Pre-Market Gappers

In response to some breaking news, a large number of investors have bought or sold shares, causing the starting price to rise or fall dramatically in relation to the previous day's closing price. When a stock has gone through a gap, you may benefit from it by looking at the table of stocks that have gone through this process below. We'll talk more about pre-market gappers below.

Criteria For Pre-Market Gappers

Traders who have been in the business for a long time know that timing is everything. As we previously said, traders are only as good as the companies they choose to invest in. Every morning, I and my other traders utilize a scanner that I've programmed to identify stocks that are "in play."

  • Stocks that moved by at least 2% in the pre-market
  • In the pre-market, stocks that have traded at least 50,000 shares
  • Over 500,000 shares are traded daily on average for these stocks
  • It is important to look for stocks with an ATR of at least 50 cents (Average True Range)
  • The stock is being propelled by a fundamental factor

Stocks having a large short interest (the number of shares that investors or traders have sold short but have not yet covered or closed off) are generally not something I trade.

A man jumping from one rock to another with a dollar sign
A man jumping from one rock to another with a dollar sign

Why Choose These Criteria

It is not uncommon for pre-market activity to be exceptional, and a Stock in Play to have gapped up or down before to the market opening with large shares exchanged (such as 50,000 shares).

So that purchasing and selling 1,000 shares won't be an issue, we select for heavily traded equities. That's why we're focusing on companies with over 500,000 shares traded on a daily basis. We also search for equities that tend to trade inside a certain range. Because of this, 23 takes a look at the ATR (ATR). ATR refers to the daily average range of a stock's price movement. If the stock's ATR is $1, you may anticipate it to fluctuate by $1 every day. Good luck with it. A $1,000 profit is possible if you hold 1,000 shares in the stock. Our preferred trading range does not include a 10-cent ATR.

If a stock has a large short interest, it means investors believe the price will decline. These stocks are especially susceptible to a short squeeze by bullish investors and traders because of the substantial short interest they have. When short sellers panic and rush to return their borrowed shares, prices rise fast and dangerously, causing a "short squeeze." If you are caught in a short squeeze, you don't want to be left stranded.

Summary

A stock that meets these criteria may not be found on the Gappers scanner at all times. When this occurs, we keep an eye on my intraday real-time scanner to see if any stocks are in play for momentum, reversal, or other trade types. However, a Stock in Play from my pre-market Gappers watchlist will always be our first option.

About The Authors

Camilo Wood

Camilo Wood - Every day, to make a conscious decision to do something, say something, or act in a way that will improve my work experience. I assist organisations in disrupting the status quo of transition. I teach them how to turn their community from enduring change to evolving through change using a realistic and repeatable structure.

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