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  • Writer's pictureTrader Stewie

The Over Night Hold Strategy!

Hi folks,

I just wanted to review a short term strategy I came up with many years ago with you here today! Many AoT members have benefitted from this strategy over the years and lately I've been seeing many stocks set up where this strategy can be applied to once again!

The Over Night Hold (ONH) is a short term momentum based continuation strategy. It works best with highly shorted stocks in bullish markets but it also produces consistent results in stocks that are highly shorted coming off of extended bottoming patterns!

I've started seeing highly shorted stocks from 2022 reversing sharply off of bottoming patterns and producing BIG results in a very short periods of time, especially Chinese stocks like $BABA, $IQ, $EH, $GOTU and $MOMO. There are many more to add to this list but these are some of the BIG ones I've noticed lately.

How do I spot an Over Night Hold? What exactly am I looking for?

  • A strong daily momentum move on at least 2x daily average volume.

  • High short interest! At least 10% of the float shorted. The higher the better though!

  • A stock that meets the above criteria but also closes at or near the top tic of the day!

Here is a $MARA setup I shared with AoT members on Thursday afternoon:

$MARA Daily Chart: Over Night Hold Setup

Note the daily volume increase in this $MARA chart! Trading well above 2x the daily average and creating a momentum continuation situation out of a potential bottom!

The very next morning $MARA opened down. Which isn't necessarily a bad thing for the Over Night Hold strategy. It does happen so this is why positioning for volatility is VERY important with this setup, expect 15% +/- movements with these types of setups!

So, as noted above a Red 2 Green (R2G) scenario in an overnight hold trade isn't a bad attribute. It can actually make the daily move stronger. What I like to look for in situations like this is a low volume sell off that is able to hold a price level for the first 15 - 30 minutes of the day. In the case of this $MARA setup it was able to hold the $6.70 area (only about 5% off of the previous day close) Then volume starts to pour in and turn the stock back green. This shows the markets willingness to buy and continue the trend higher. At the point the stock turns green you can inch your stop loss up just below the Low of Day and consider reducing the size of the trade by half to manage risk further.

You want to be quick to take gains in these types of setups. They tend to move quickly. In this $MARA example it only took the first hour of the day to produce a 10%+ gain.

In the scenario where an Over Night Hold (ONH) gaps up the next day I tend to like to sell the gap up at the open to book the gain!

How can I scan for setups like this myself?

What has helped you with consistency in this trading strategy?

  • Smaller position sizing. Be mindful of the potential volatility! Plan for it!

  • Try to identify 2 or more top quality ONH setups in the same day and allocate capital equally across the setups! This way if one doesn't work out the second one might. Splitting the difference!

  • Be quick to take gains. Be aggressive in this regard!

What does a Over Night Hold setup look like in strong momentum bull market?

Here was a trade AoT made back in 2020. $XPEV. I made a step by step video reviewing how this trade developed. This is an example of selling a gap up momentum move!

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