Is it just a dip?
Here you see a trend that is met with little resistance, and selling pressure is virtually unseen with Resistance being easily broken.
Here you witness the immediate stretch from price below VWAP. You also witness large moves (5-10%) away from VwAP before seeing small rebounds that are followed by further rejections
Variables To Consider
How much sell volume was involved in that the downwards price movement? Did a small amount trigger a large price drop, which was followed by higher volume into a recovery? that most likely means it was just a dip, not a dump.
Volume / Float Ratio
This ratio is one of the most under-looked factors in trading. A lot of traders find it annoying to deal with numbers, so they skip out on this variable. The amount of shares being traded on a stock is highly important in determining whether current volume is enough to suffice for more of a run.
These definitions are simply estimates based off of personal experience (V/F Ratio):
- Less than 0.2 at open (first 5-10 minutes) -> Questionable
- 0.2 at open (first 5-10 minutes) -> Morning Spike Potential
- 0.5 at open (first 5-10 minutes) -> Bullish
- 1.0 at open (first 5-10 minutes) -> Supernova Potential
Daily Chart (Patterns, ETC)
What does the current daily chart pattern show? Do you see momentum continuing from this price point on? And if so, for how long? Determine at what point momentum will exhaust.
Other Stocks In Play?
If there are other momentum stocks that are seeing more / similar volume to a high volume stock you are interested in trading - there is a high chance that retail traders may ditch your current stock for other stocks if it does not perform right out the gate.
How Overextended is It?
A stock that has already 'gapped up' on lower volume Pre-Market, or spiked very quickly on little to no volume wiill be faced with resistance at the open, especially at higher levels (30%+). Be careful counting on already 'Gapped up' stocks for continuation as the chances are much lower than a stock that has gathered momentum intraday, and shareholders will be eager to take profit.
A few indicators that can measure overextension intraday are RSI and VWAP