When day-trading “In-Play” stocks, using pre-market levels is huge during the regular trading session. The levels set in pre-market usually will be places of interests for traders looking for support or resistance. This is especially true if that stock has not been at those levels in a long time. Today we had this scenario in Anadarko Petroleum Corporation, ticker symbol $APC. It had gapped up on news that $BHP may offer $90/share to buy them out, thus making it an In-Play stock.
Here is the 2 day chart of $APC, with only extended hours showing for today’s (December 30) action.
Pre-Market Levels
As you can see, I have drawn a line in areas that were important for the day. Two areas a trader should have been watching during the intra-day action was $74 (2 tests in pre-market on the 5 minute time frame) and 76.40-76.50 (2 tests in pre-market). These would have been obvious support and resistance levels one could have used during the regular trading hours.Lo and behold, the levels came into play as $APC first spiked on the open but then sold off to go and find support at $74. Had you gotten in at that level with a reasonable stop (being a $70+ dollar stock, a reasonable stop should be anywhere from 0.25-0.35), you could have caught a nice 2 point move to resistance at 76.40-76.50 where after failing you could have dumped your shares for a nice profit. I would love to get this opportunity everyday as this was a great risk/reward trade. You risk $0.25-0.35 to make $2, making that over a 1:8 risk/reward ratio. Truth be told, I missed this trade mainly because I was not trading today, but come the new year, if I get this opportunity every day I trade, I will for sure seize the chance and take it.
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