GNCA--WHAT ON EARTH IS YOUR BIAS?

Good Saturday everyone. I am here relaxing at home today flipping through some charts on finviz and I came upon a great trader on Friday. GNCA. I knew I had to write a blog on it. One of the big things I have been working on in my own trading is something called a bias. This is what I expect the stock to do the next day. So when I am writing my plan for the following morning I normally try to have 1-2 different scenarios as to what may happen. Sometimes it is fairly easy to call a bias on a chart. IE: r/g , g/r , failed follow through set up etc. Other times I have to stare at the chart and really think about it. Having loads of screen time is key to get better at developing your bias for a stock. At times though you come upon a stock that no matter how good or experienced you are it will be very similar flipping a coin. GNCA is that stock for today. I didnt trade it or have it on my watch list yesterday but I feel it will be a great lesson for many.  I will try to make a case for which bias was in fact the most probable but also make sure to bring up how even with the right bias you could have been in trouble if your entry wasn't correct.

To start off here is a look at GNCA after yesterdays action

Thursday what you would have seen on this chart is the big move from a low of 4.83 to a high of 8.07. This is near to a 100% mover if you caught it at the bottom. Not typical in big board stocks but it has happened plenty before. So you are running your scan Thursday night and you come upon this chart , it sets off an alert in your head. This is a good one!! How do you set your bias here?? Well usually when I see a powerful stock like this that had a strong first day I like it either for a red to green setup or If i believe it is already too extended I will like the over extended gap down set up. The next day it gapped down so both biases could actually take place. Lets look at the intraday chart now for Friday

You may look at this and say: "well of course it was a short , it moved a big amount % wise and was at its ma200" .Well thats all good and dandy but i have seen stocks like this keep on going , especially if they open red. Good point however and in this case you would have been right. So let me take you through the morning action. There was a gap down and the stock began to slightly base making a higher low at around 9:45, those looking for the r/g may have taken the long here and would have been in the green for a few minutes only to see their profits evaporate quickly. Funny enough, those who took the short here and held all day would have done fantastic ! Later on at around 10:50am there was another chance for those who called for a r/g set up. The move was a nicer one if you caught it early, but if you thought this was a home run trade you were very disappointed. The thing with overextended gap down plays and this is a very important point is that they typically TRY to go r./g sometimes they even push a bit higher than green and then fail. The goal with these trades is to have conviction. If your bias is that this will be an overextended gap down and you let it go near r/g or r/g you take your short you MUST hold it until it either takes out your stop or the day is coming to an end because the toughest of these plays WILL try and shake you out. Now , why would you have a stronger bias for a gap down short as opposed to a g/r play. Gather your points to support your bias. Over extended gap down :

1) stock moved up a huge % stock doubled in price!
2) was at ma200 on daily chart a strong resistance
3) intraday look was extended

So having these points in favor of the overextended gap down set up you could now prepare for this the next day. You could have seen a long entry for GNCA but you would not have taken it because your bias was strong and you had a plan. Let it try to go green and then short it and stay short till it cracks!  Hope you enjoyed this post