This is a shorting strategy that has been used for many many years by traders on mid to large cap stocks and I'm here to tell you it works on penny stocks too! This is again a pattern used on an intraday basis much like the “Green to Red” and the “Last Minute Spike.” What you want to look for is penny stocks that have gapped up at the open for above 7% and at some point at the day go below what the stocked opened at. When the price goes below what the stock opened at it tends to fade down to the previous day's close, hints the term “fading” the gap. All you want to do is short when you see the current price busting below the open price, but of course it's always better to wait for confrmation of the trend. That is your queue to enter your short position. Here are some examples of what I'm talking about
As you can see SBLK made an almost perfect fade back to the previous days close. I do want to point out that obviously these stocks gap up because of news. Be careful when shorting these big gap ups because a lot of times the news is very fundamental news for the company (I.e: earnings, takeover bid, etc.) In fact if the news isn't fuf then I really don't bother trying to short because it's just too risky and less predictable. This applies to every pattern and/or strategy mentioned in this eBook.
So we've gone over patterns and strategies for shorting penny stock pumps, but I bet you're asking yourself, “How do I fnd these stocks?” Read on to the next page my friend.