How To Spot Stock Price Action Clues For Stock Option Trading

I will detail how you can use four simple price patterns in the price action of stocks to help determine which stock is going to make a potential huge bull run which can be exploited by an alert trader with stock option trading techniques for huge gains. Details will also be revealed how combine these price patterns with potential momentum stocks about to make explosive moves with stock option trading for returns of several hundred percent. The four price patterns that I will be focusing on in this article are the slope of the stock's trend, gaps, strong closes in price action, and laps in price.

A price gap occurs when a stock opens higher than the prior day's price high. If a stock gaps higher than the previous day's high in the direction of a bull run then it reveals great strengh in the direction of the trend to the upside because investors are bidding up the price of the shares before the market opens for trading. When the lows of the price gap on a stock are even higher than the high of the previous day's high it shows even more conviction to the upside of the stock's trend.

A lap in price happens when a stock opens greater than the prior day's close but less than the prior day's high. This is not as strong as a gap in price but a lap in the direction of a bull run lets a skilled option trader now that there is momentum to the upside and that can be profited from with skillful stock option trading. A skilled trader will also watch for consecutive laps in price in the direction of the bull run which reveal how strong the trend is to help gauge risk and potential for big profits.

Thrusts in price action show strength in the stock's trend. A thrust is also called a wide-range bar which is almost or greater than the previous five day's price action. Thrusts in price reveal that mobs of buyers have taken interest in the stock for various reasons (ie: earning surprises) and are bidding up the stock's price. These types of price patterns are common when a stock is breaking out of base pattern.

The slope of the trend is also an important indicator of momentum to the upside and whether that momentum will continue to gain strength. A price slope of 90 degrees roughly shows a healthy amount of relative strength so if price declines slightly or if a stock begins to form another base then an alert trader can plan determine the health of the uptrend for trading call options. However, if the price slope goes to 45 degrees or higher, the skilled option trader knows that these accelerated moves often spike higher before crashing and adjust their option trading strategy.

These price patterns of gap, lap, slope, and thrusts are but four of the clues to help you spot stocks that have the potential for huge moves. By studying price action for these price patterns you can trade stock options as they make new highs or during pullbacks for huge profits as you leverage there explosive profit potential. Watch how many times these price patterns occur during a three to four week period on a stock and it will help you determine which stock has the highest probability to go on make historic runs in share price.