STOP CHASING INSTITUTIONS: How To Spot Their Moves BEFORE They Happen
When the market takes a hit, it’s easy to panic — but this is actually one of the best times to spot opportunities.
In a down market, the key is finding stocks that show relative strength compared to a broader index, like the S&P 500. These stocks are often the ones that bounce back harder when the market recovers…
And they can provide some of the best short-term gains.
The S&P 500 dropped about one whole Average True Range (ATR) on Wednesday — a normal, non-random move. While most stocks took a hit, not all of them fell as hard.
That’s where your opportunity lies.
When the market drops, I’m looking for stocks that either barely went down, or maybe even went up. If the index is down one full ATR and a stock is only down half or a quarter of an ATR — or even better, it stayed flat or went up — that’s a sign of strength.
The logic is simple…
When the S&P 500 is down but a particular stock holds up well, it’s telling you that there are buyers still interested in it, even in a weak market. If the market bounces the next day, you can reasonably expect that this stock will bounce even higher than the index itself.
Now, there are a few ways you can find these stocks…
One is to use the ATR to measure how much a stock moved compared to the S&P 500. If the index is down one ATR, and the stock is only down a fraction of that, then you’ve got a strong candidate.
Another method is simply looking at the charts — if a stock stayed flat or moved up while the rest of the market dropped, that’s another clue that it’s holding up well.
I’ll give you an example from my own trading…
There’s a stock I had been watching that bounced off a liquidity pocket recently: Home Depot (HD).
It was performing well, and while it did drop on Wednesday, it was only down 0.55% on the day — less than one-third of its ATR.
Meanwhile, the S&P 500 dropped one full ATR.
This kind of relative strength tells me that if the market bounces, this stock could see a strong move to the upside. HD did see a pop on the open today, and then fell along with the market soon after — while remaining relatively strong in comparison into this afternoon.
Better yet, if you find a stock that actually went up during Wednesday’s market drop, that’s an even stronger signal. When the S&P 500 bounces, those stocks will often surge, giving you a great opportunity to capture gains.
So, when the market dips, don’t just sit on the sidelines. Use it as a chance to find the stocks that are holding up well — these are the ones that will lead the charge when the market turns around.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. STOP CHASING INSTITUTIONS: How To Spot Their Moves BEFORE They Happen
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