Although this strategy focuses of the entry, the authors mentioned about placing the stop loss and vaguely about how to place trailing stop. This is up to each trader to determine on his own to make this a successful strategy. Here are some of the examples from the scan.

Figure 1 Prices went below yesterday’s low and immediately rebounded and never look back.

TXT fits the typical action this ideal setup. Having opened above the 80 percentile of the previous day’s high and low and closed below the 20 percentile. Finally, the last criteria was made when the prices dipped below the previous day’s low by more than 15 cents. Upon making the dip, prices reversed. When it got back to the previous day’s low, a buy signal was taken. With the stop loss placed at the day’s low and a trailing stop or predetermined target.

Figure 2 small gap up then dipped down by midday.

The scan showed AKAM as a candidate with the right setup. The previous was a heavy selling day. The next day, prices remained higher than the previous day’s low at the opening, but then moved lowered then suddenly reversed. When it moved back above the previous day’s low, a long entry was alerted. However, this up momentum didn’t stay very long. Either profit had taken immediately or moved the stops to breakeven (at yesterday’s low)).

Figure 3 A quick move in the opening hour.

HPC was another candidate but this time it happened at the opening hour. Prices gapped up then moved down past the previous day’s low, then moved back up again. A small gain would have sufficed given the nature of the bearish market.

Below is an example that the scan would not have caught in the filter. Because prices never moved back to yesterday’s low, the scan didn’t alert the trader and therefore had sit out of a losing trade. On the bottom horizontal line is the low of yesterday, that is also the long entry point should prices decide to move back up. Fortunately, the stock opened with a gap up but then moved down straight away and never came back above the previous day’s low. This is one the advantage of this strategy: weeding out highly momentum stocks.

Figure 4 A stock the scan would not have picked up.

Try this scan and do your own research and modify the settings however you feel comfortable. This setup is one of the more risky trader due to it being a counter-trend trading. But the profits are quick, exactly what the day traders look for.