In the pre-market, NU Skin Enterprises Inc. (NUS) was gapping up at $93.00 and made a run to the $101.00 area.  This NUS market action provided traders with an early sign to enter a short position in the premarket. 

GAP TRADING 101

Let me review how you could have potentially faded this stock in the premarket.

Using a two-minute chart see that Nu Skin tested $101.98 then pulled back into $98.70. At this time, there was no reason to enter because the stock did not give you an entry yet.  Next NUS ran to try and test that $101.98 area but failed to break over it and find selling.  This is the first clue that you need an entry short.  The break of the two minute bar at 100.24 gives you a short entry with a stopover premarket highs at $102.00. Then eight minutes later the market opens and NUS traded at $97.00.  This means that your position would be already up over three dollars on the move in the premarket but has a potential to drop even further. The trade would have lasted from 9:22am to 9:42am giving you $10.24 in profit on your position size.

Learn more about Peterson’s Gap Edge Trading firm here.

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THE BOTTOM LINE

Watching stocks that gap like NUS in the premarket could provide you with some great trading setups.

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