Stock Trading Lesson DHI | When a Strong Stock is Not a Buy

Trading Lesson: DHI

Sometimes a higher open in a strong stock is not a time to buy. It can be a time to sell to those late to the trade. DHI price action is strong, a solid stock to buy with new multi-year highs this week.

If you dig a little deeper into this stock trading lesson, the volume traded the last 2 days, has increased AFTER a significant move higher.

This is typically a “clean-up print.” I call this exhaustion to give you a better mental picture. It shows us the buyer who pushed the stock higher is done.

In this case a higher open today would not have the “big-money” support to hold the stock higher. So if you already own the stock, a higher open would be a profit taking opportunity, not a time to initiate a new trade.

To take it a little deeper we would anticipate a higher open to trade lower for the remainder of the day and close below the open price.

Stock Trading Lesson

Order Flow | Stock Trading Lesson | Spot the Big Money

Order flow isn’t a term you will hear on CNBC or read in the Wall St Journal…

It’s an underground secret, exposed only to those in contact with big money. When tens of millions of shares are involved, order flow is not going to be announced on TV.

That is unless they want you to buy shares they need to sell, or, they want to accumulate (buy) a few million shares and need you to sell to get the shares.

How do they do that? It’s simple. It’s done with a specific type of price action…

What attracts the attention of retail investors? Higher prices. More specifically, fast-moving higher prices. Said through the lens of technical analysis, higher prices with wide fluctuations after a significant move higher.

The “fluctuations” part is what makes the retail buyer think he has a second chance at a better price.

So we are clear, a “sloppy/whippy” topping pattern (after a mark up/up trend), is when institutions are marketing stock for sale. They are telling you they need to get out, and they are attracting you like moths to a street light with price action.

Continue reading about order flow

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