Happy Friday,
Yesterday, IrishBornInvestor joined our free overnight momo discord server.
He was referred to the chat by someone in another chat.
He's been trading for a bit, with a new focus on overnight momentum, even before joining the group.
Here's what he said after joining:
“I've been working on an Overnight Hold Setup for several months. As a low effort secondary setup to go along with my main setup which is Catalyst Trades. Anyway, I mentioned it in a private discord and someone linked me your site (we both took BYND same night). Interested to see any nuance that is discussed here that I may not have figured out on my own with my version of it.”
His results are solid.
(Click the image to enlarge on desktop)
These results are great to see, but it really doesn’t surprise me.
I've traded this strategy since learning about it during Covid while working at SMB Capital.
The strategy is simple.
The strategy involves buying strong stocks on huge volume that close near their intraday highs and shorting weak stocks on huge volume that close near their intraday lows. Ideally, you're looking for follow-through in after-hours trading, a gap overnight, and sometimes continuation into the next day.
But there's a crucial caveat: the market environment matters.
The way I dictate whether I should be taking overnight longs, overnight shorts, or being completely hands off is with the simple indicator I built into thinkorswim.
This indicator is my gospel when it comes to this strategy.
The indicator is based on the 9-day moving average of the daily indices.
When the indices are 1% or more above the moving average, it reads "Trending Up”
When the indices are 1% or more below the 9 day moving average, it reads “Trending Down”.
When the indices are within 1% of the moving average, it reads "No Overnights.
All it takes is two out of three indices to have the same reading to dictate what I should focus on and what overnight momentum filters to look at.
When two indices are reading "Trending Up," I use these two scanners into the close and look for overnight longs:
Overnight Momo Long Mid/Large Caps
Overnight Momo Long Small Caps - sometimes higher priced names filter through because of rvol being so high. That’s okay!
When two indices are reading "Trending Down," I look at my overnight momo scan on the short side:
Overnight Momo Short Mid/Large Caps
The strategy isn’t all that difficult, but, there is always nuance and one of the more important aspects of the trade is knowing what direction to focus on, and when to avoid the trading strategy all together.
If you want access to my market trending indicator, reply with “indicator” and I’ll send the URL.
You can also replicate the scanners by signing up to Trade Ideas for 25% off their New Year’s sale – there are just a couple days left.
-Kyle
