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How To Trade On A Friday

Slower  trading and weekend holding risk necessitate looking for stable plays at the end of the week, Real Money's Tim Collins argues.
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Trading on a Friday can be slow, so it isn’t always easy to find good opportunities for your end-of-week portfolio.

Real Money’s Tim Collins has a plan.

“On Fridays, I like to identify a chart or two with a nice setup into the next week” Collins wrote on Real Money recently. “I like to look for trades in recent IPOs that may have started strong, but then saw a hit to their price. As long as nothing hasn't drastically changed fundamentally, if I see a bottoming pattern, I will follow along closely and watch for a trade.”

Collins cited Outbrain  (OB) - Get Outbrain Report as an example of a stock that had both a nice setup and also fit the broken IPO category last Friday.

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“OB priced at $20. Traded around that range, then broke sharply lower in August. Once the bulls lost the $20 level, they also lost their confidence. The bounce in September created a lower high. This has created a clear resistance line from the September bounce,” Collins wrote. “While this sloping resistance was being created, traders also tested sub-$15 lows on the stock, which were quickly rejected. That offers a solid stop level for shares. This rounding bottom resembles a potential fishhook setup. At the very least, it shows the bulls haven't given up.”

Of course one needs to be a little wary. “The Friday to Monday gap often can hurt traders, especially high-volume traders looking to make relatively frequent moves. Monday morning markets typically follow and reflect the trends that began on Friday afternoon (which makes sense given they are consecutive trading days). However Mondays also tend to post weaker returns than Fridays.”