DaytradeTeam Profitzzz

We have all heard analysts and brokers hammering home the phrase "buy the dips" as a way to encourage people to add to positions as a stock moves lower. Unfortunately, this strategy has backfired significantly on anyone who was doing it in 2000-2002. This does not mean that the strategy does not work, but just that it is only likely to work in certain situations. Here is a short-term trading situation that can lead to nice profits with very high-percentage trades -- one that we have used very often in our Small Cap Trading System.

When a stock or index is in an uptrend (higher highs and higher lows over the recent past trading history) and breaks through what was thought to be a resistance point, you should be looking for an opportunity to buy the stock on the next significant dip. A significant dip is one that takes the stock back down to the original, now broken resistance line (which is quite possibly now support).

Buying on dips after a breakout does not always work (no trading strategy does), but it does work a high percentage of the time for a quick gain. Look for stocks that break through resistance levels, make a nice breakout up move, and then dip back down to the old resistance line. Buy there or near there in the hopes that old resistance has indeed become support. Target should be a move back up 50-75% of the dip -- (if it fell $1.00, look for .50-.75. if it dipped $5.00, look for $2.50-$3.50 profit). Don`t try to ride it all the way back up to the new high unless you are going to use a trailing stop that locks in profits. If the stock does not bounce back off of old resistance line within a short time period, exit the trade quickly. A further drop of one forth of your target profit should be a "sell for a loss" signal.