Supernovas - How to Trade Them?

First of all, you might ask.  What is a supernova?  A supernova is any stock that has gained enough momentum and liquidity to move 100% - 1000% over the course of one or multiple days.  These are some of the most profitable stocks due to how liquid and fast moving they are.

How Often Do Supernovas Come a Year?

  • In a bull market I'd say 1-3 times a month (15 - 20 times a year)
  • In a bear market I'd like to estimate around 0-2 a month (less than 10 a year)

Should I base my strategy around Supernovas?
Sure.  In fact, it's always recommended to wait for the best plays.  The ability to distinguish the best set-ups from the rest is the most crucial skill in trading.  This combined with patience and you'll find that you're only putting your money into the market on Supernova-Like plays.  Given this, you'll have a higher % chance of succeeding in the trade, therefore giving you a higher % chance of success in trading in general.

Those who have the ability to day trade can make money through scalping.  But those who are limited to high selectivity should always aim to profit off plays that could potentially be a supernova, and ignore small-time moves due to the limit on day trades per week.

What is the best indication of a Supernova?
From my experience, relative volume.  Always look at how today's volume differs from previous trading days.  If we see a massive higher relative volume at open that stays with the stock consistently throughout the day, we are in zone for Supernova potential.  Being able to identify this relative to float is also important.

How can I get better at spotting Supernovas?
Practice and Research.  Supernovas are built off of momentum and usually have a catalyst to back it.  Get good at identifying strong catalysts and using technical's to confirm the momentum.  Aside from technical's, it's important to evaluate your trading environment (other trading chat rooms, audiences) to see if the hype has the ability to build and continue - with this information in mind, you can determine how long momentum will generally last.

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