MDGS DAY TRADE SETUP – VWAP BOUNCE AND HIGH OF DAY BREAKOUT FOR 1.45 : 1 MAX GAIN RATIO
Medigus Ltd (MDGS) announced today that it recently received its first commercial order for COVID-19 serological test kits. Its stock traded heavily today during the first hour of trading, bouncing off the VWAP and briefly trading above $5.00 before making a gradual decline that lasted through the day. The short lived move provided traders an opportunity to achieve a maximum gain-loss ratio of 1.45 to 1. See my analysis below.
ACCOUNT OF EVENTS
The setup occurred on Friday, May 1, 2020.
At 6:30 AM PT I checked my TD Ameritrade app to see how the markets were doing. There was negative bias, with the Dow at -1.77%.
I headed over to CNBC to see if there was any news to aid me in my trades today. There didn’t seem to be anything fundamental as the main headline read “Dow set to fall more than 400 points after best month in three decades, Amazon leading tech lower.”
I opened up Finviz to see this morning’s top gainers. There were only a handful of stocks that were up 10 percent or more, which is not unusual for a Friday. Even less so were the number of attractive stocks. Sometimes I actually prefer this, as it makes it less complicated to narrow down, especially when one of them has glaring positive news on it.
Right at the #1 spot was MDGS, up over 82 percent with nearly 6 million shares traded. The news was quite positive. I figured it was a good catalyst since the US’ struggles with Covid-19 testing have been well publicized. I placed it at the top of my mental short list.
Myomo (MYO) held the #2 spot and had great volume, but there was no news on it. There was negative news on it a few weeks ago, so I didn’t write it off completely, as it could have possibly been a good recovery play. I have, in fact, traded that stock successfully in the past.
Akari Therapeutics (AKTX) held the #3 spot. It had positive news on it, but it was well below the VWAP already and didn’t have much volume.
I watched these stocks for the first 10 minutes of trading. MYO and AKTX sold off hard while MDGS was oscillating across the VWAP. I decided to lock onto this one and ignore the others.
At 6:41 AM PT it popped up sharply above the VWAP and touched $4.41. Then, at 6:42 AM PT it pulled back and touched $4.00. With this in mind, I placed a buy stop market order at $4.46 with an intended stop loss at $3.99.
MDGS then made some big strides up, filling my buy order at 6:45 AM PT. I added my stop loss soon after. Since I was going for a 2 to 1 gain-loss ratio I placed my target limit order at $5.40 [ (($4.46 – $3.99) x 2) + $4.46 ].
At 6:47 AM PT the stock broke its high of day. It then bull flagged and pushed as high as $5.15 at 6:52 AM PT. I moved my stop loss to break even because the stock reached my 1 to 1 gain-loss ratio price of $4.93 [ (($4.46 – $3.99)) + $4.46 ].
I was hoping MDGS was reach my 1.5 to 1 gain-loss ratio price of $5.17 [ (($4.46 – $3.99) x 1.5) + $4.46 ] so I could move my stop loss to $4.93 and lock in a 1 to 1 gain-loss ratio. Unfortunately it never did and I got stopped out at break even at 7:09 AM PT.
Anyone who was going for a 1 to 1 gain-loss ratio would have profited from this setup. So although I myself did not profit, I am logging this as a winning setup in my data tracker.
NOTABLE DATA POINTS
Day of week: Friday
Approximate market performance at open: Dow -1.57%, S&P 500 -1.75%, Nasdaq -2.05%
Company name: Medigus Ltd.
Sector: Medical Appliances and Equipment
Recent news date: 05-01-2020
Recent news headline: Medigus and L1 Systems Received First Commercial Order for COVID-19 Testing Kits
Approximate performance before buy signal: +75.05%
Approximate volume before buy signal: 14,492,009
Float: 2.33 million shares
Setup: VWAP Bounce and High of Day Breakout
Buy signal time: 6:43 AM PT
Entry time: 6:45 AM PT
Maximum exit time: 6:52 AM PT
Entry wait time: 2 minutes
Exit wait time: 7 minutes
Order type: buy stop market
Entry price: $4.46
Stop loss price: $3.39
Maximum exit price: $5.14
Maximum gain-loss ratio: 1.45 to 1
Did I trade this setup? Yes