A Big Offer Stepping Down and then Lifting- Reason to Buy (HPT)

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One of our first lectures is a compilation of Reasons to Buy a stock. We just got out of a really good
lecture with our new traders. And I think that they may have actually gotten all of the reasons to buy.
Well done by them. Below is an example of a trading pattern that offers a reason to buy.
One of the easiest patterns to trade was present with HPT today. I searched for a stock to trade into
the Close. I noticed that this stock was trading between 43.50 and 44. Presently it was trading near
the bottom of the range. I noticed that a big offer had stepped down consistently from the 43.80’s
and now was decrementing at 43.57, so I paid the offer. I placed my buy order (SDOT 43.60 to buy)
to pay through up to 43.60, but I got a print at 43.57 (price improvement). When this offer lifted I
really wanted to be long. I did not want to miss getting long if this offer lifted. So I was willing to pay
through even up to 43.60 if I did not get the stock at 43.57. My assumption was that the big offer that
had stepped down from the 43.80’s was now about to lift. This order had caused the stock to drop.
This order was forcing the stock down. I thought that this offer was about to lift. And that when this
big offer lifted, then the stock would trade higher.

I did not trade this stock all day. I was new to it. So like a momentum play and like a stock that
comes up on your filter, I had to play defense first. With these types of plays, I must spot the bid that
I can hit if I get long and the stock trades against me. At 43.55, there was a huge bid. So my risk was
two cents if the stock traded against me, and I was confident that I could easily sell this stock at
43.71 if the offer lifted. There were no significant offers in the Open Book or showing on the box until
43.71. The stock had just come from the 43,80’s. So this trade offered an excellent risk versus
reward opportunity.

You will notice this trading pattern often in NYSE stocks. A big offer steps down and then steps
down and then steps down. And then when this offer is taken, when the offer finally lifts one penny,
the stock trades higher and higher and higher. If you spot this pattern you ought to stick with this
stock. This is what we refer to as easy money. As Cramer likes to say, “When you go to the bank
and hand them a check they don’t ask you how you made the money.” When you go to the bank
they are not going to turn you away because you made it on some really easy trades. They will cash
your check.

Hey sometimes trading is that simple. You notice the trading pattern, and the trading pattern is easy
to decode, and then you are able to make money off of the pattern. And our goal ought to always be
to find the easiest way for us to find good trading opportunities. So if you see this trading pattern, pull
the trigger.