BUY on a Strong Open

BUY on a Strong Open

“Buy on a strong open.” What does that mean? Once a Candlestick “Buy” signal has made itself present, investors want to see one obvious element in the next day’s opening price; that the buyers are still committing. The signal hi itself reveals that buyers have moved into the stock. Will that buying continue? That is easily identified the next morning.

Establishing an initial position requires a small amount of research. What is the direction of the indexes? What is the direction of the sector index most related to that particular stock? How are the other stocks doing in that sector, the ones closely associated to the stock you are ready to buy?

The first hour has always been considered the amateur hour. However, that reputation was created years ago when stockbrokers were directing everybody’s funds. They were buying with the orders they received before the market opened. Buying early in the first horn; having the advantage of the Candlestick signals allows an investor to exploit the buying of the first hour. Use that to your advantage.

The entry instructions “Buy on a strong open” has two definable variables. What is considered strong, and what is considered the open? First, let us dis­cuss the definition of the open. Some investment gurus recommend not trad­ing in the first thirty minutes of trading. The volatility is too great during that time. Most traders know the best trading opportunities present themselves in the first and last hour of each trading day. Probably 60% plus of the total daily volume occurs in the first hour and the final hour of the trading day. The pent-up research since the close of the previous day, is implemented during the opening hour of the next day. This is the time to take advantage of the Candle­stick signal.

A new dynamic is in force during the first hour of trading. Investment decision-making processes are put into action with buy and sell orders in the opening hour. The inordinate volume is crossed and matched in market condi­tions. Once this volume is consumed by the joining of buy volume and sell volume, the price will begin moving in the direction of the remaining order balances. This inordinate volume makes the first hour more volatile than the other trading hours during the day. It also influences the direction and the magnitude of the move. Take advantage of the first hour.