The collapse appears based on news reports that "Lithium Exploration Group entered into an equity purchase agreement with an investor for the purchase of $1 mln worth of shares of the Company's common stock at the past five trading sessions' average price. "
Here's how I successfully traded the collapse of a super volatile much hyped stock.
Nail the Entry: I determined the bottom of the bounce by waiting until the 5 minute bars were completely within the bollinger band. Then I waited for two complete green candles had appeared before buying. Once the green candle crossed the moving average it exploded. I also monitored RSI-7. The RSI bottomed out at about 6.5. Using RSI-7, any value under 10 means almost certain direction change.
Lock in profits: When it took off it was bizarre, the price climbing very evenly, at about 1% a minute for almost an hour. I manually adjusted my stop every ten cents of price gain.
Sell when it peaks. This is where the reality of trading highly volatile stocks hits home. When the top came, the price dropped so quickly that the queue of orders meant that getting filled was a crap shoot. If I had been able to sell sold based on my stop limit order at $6.60, I would have made 68% in under 60 minutes.
Throw out all rules if necessary: When the price blasted through my stop price multiple times without selling, it was clear the price was collapsing faster than orders were filling. I threw out the liferaft and put in a market order in, knowing that it would fill but at a terrible price. It did fill, over 5 minutes later, and at exactly 50% of the value where my stop limit order had originally been set. If you want reliable instant fills, trade AAPL, not LEXG. But you won't make 29% in a morning trading AAPL.
Don't lament what could have been: I'd nailed the timing of the bounce which made me feel good, and made 29% profit in an hour of watching and an hour of market exposure. Not bad for a mornings work.
Happy trading.
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