NEW: Live classes are posted - Click here to see the calendar!

How do you factor in overnight action for the next trading day?

February 28th, 2017

Hey, this is Sasha Evdakov founder of Tradersfly.com, here to share with you some insight about trading, investing in the stock market.

2016-09-15-factor-overnight-action-next-day-010
In todays video what I like to do is share with you some common questions that people asked me and today's question is "How do you factor in overnight action for the next trading day? Are there any clues to how the next trading day will move?"

The simple answer to this question is "Yes there are some clues and things that I watch". I'm gonna share with you some insights here right now in this video about some of the things that I watch but keep in mind this are just fraction of the things that I watch because really I look at a few other things and I look at things from a bigger perspective.

I will shade some light on it right now and give you some insight but keep in mind this are just simple examples and then if you get examples that are a little bit more tricky or stocks are a little bit more tricky to diagnose or detect then it'll be little bit more difficult so you have to give good at what skills and things I share with you here in this video lesson.

Why don't we hop on screen so I can show you exactly what I'm looking for and give you some insight, will just do one or two examples and maybe that will help to give you some insights to the overnight action.

Looking on screen here's what I really look at, first looking at a big picture screen I'm looking at the overall market picture and what's going on with the market. Typically I don't just look at the overnight action, the overnight action does helps somewhat but I really look at the daily action.
2016-09-15-factor-overnight-action-next-day-041
The daily action to me is more important. When I'm looking at it right here right now you can see I'm looking at the day to day action and you can see that right here we've had some daily action that's been lower volatility. And when you look at it right here there's higher volatility. As I look at this, I'm looking at the day to day action first, then I'm looking at the stock itself.

As I look at this stock which is Apple, I'm looking at how that stock has moved recently and the day to day action. Looking at this, here some clues and insights that you'll get from it.

As I look at this stock lets just break apart this bar right here and look at the movement within this bar. As I'm looking at this bar I notice that I closes at the highs, we open up at the lows and we kind of close at the highs. It's not at the tip of the highs but it's near there, its near those higher high prices, and when I look at the volume bar, that volume bar is also picking up, it's picking up in a big way. If I look at it in the moving average you could see the moving average right here it's the 20 day which is first 20 trading days in a month that's why I use this white line right here, there's 20 days trading in a month you can see its much higher in the monthly terms, so you get this reversal of fact.
2016-09-15-factor-overnight-action-next-day-072
The next day what I would expect is because of this end of the day price action I expect the same thing to happen because overall remember what we're looking at, the bigger picture of the market has been that it's really heading to the down side.

It's been heading lower from this bar to this bar, the only good bar we had was this one bar right there on that upside, because of the volatility.  But overall we've been heading really lower with higher volatility. But this stock has been still hitting higher so when I look at it and I'm looking at this one bar right there, I'm going to see still positive movement even though the market has been heading lower.

And the previous day the market again it was acting weak, the market overall we know has been acting weak. But as I look at the previous day what happen at the high's the stock came up in to those end of the day levels and it closed towards the high with the higher volumes, so the next day we see again more volume picking up. We see the price action fairly good now it's start to get a little more extended but what do you see?

You see higher volume and you see good price action, so the stock is behaving well. The previous day? You had again open at the lows close at the high's, exactly what you want to see. Then the next day, again what do you see?

Higher volume picking up, we open up we get higher prices from the previous day. And we close towards the high's we're again not at the tip of the highs but we're close near those highs. What do we expect to happen? We expect to follow through again we open and where continuing there. This day still has not ended but you also take into account how the price action has moving.

The other thing I'm taking into account is how over extended the move is, cause remember stocks become over extended so you can't have this move go too far, too fast. You can't have it moving to the up side, lets say in a straight bullet point. Instead a nice angle would be good. Even this angle would be a little too extended, here this is going to be too extended at some point and you'll probably see a pull back - coming back into this moving average level. But overall for multiple days you can see follow through, so that's the first thing.

The second thing to watch

The next thing I'm also watching is the bigger picture moves. If I'm looking at support in resistance line right here, you could see again we're clearing the resistance level and that another thing to take into account, so more than likely you'll see follow through.
There are a few quick picture views, if I look at Facebook and if I'm looking at this concept, again in Facebook there is a few areas where you could take a look at this.

Let just back track a little bit so we can look at it on the downside and just see how it looks, just because with Apple already we've went to the upside and it was a little bit easier to see with the volume.

Let's look at it in a little more difficult example, like here for example just a quick run down you could see this stock became a little too far extended from the moving average which was over here, we top out so we get a pull back towards the moving average and you can see the volume picking up to the cell side. But here, let's look a little bit further and just look and see if we can pick up the next day and whats going to happen over the next few days when we don't get any very very clear signals.
2016-09-15-factor-overnight-action-next-day-151
Here I'm looking at Facebook stock and what I'm doing is I'm seeing okay this stock became over extended we created massive movements in that stock with high volume. So the extension is real, there's your pop so now we get a little bit of resistance and this stock is coming into some resistance. Right here we also have a support level that got built right here by this level, again now we have some support level right here.

That's a kind of our initial setup and situation as you take a look at this and you see that support level you're seeing this bar as we come in right here, that bar right there you can see that stock is closing towards the lows. Let's see if I can zoom in even further into this, so here lets just take a look and you see now that right there that bar is closing at the lows or pressing down and you could see the volume starting to pick up. It's not more than moving average, but if you look at the last few bars it was less than the moving average.

So what's happening here is we get a very dangerous red bar that's picking up volume, picking up in speed. And where closing at the lows so it's testing that level. If it came in with even more volume you would probably have seen it break and it would be an extension of that but it would also be a lot easier to spot, this one was not as easy to spot.

Then what you see next is you see that break, there's that break and it broke right here even gap down continue to follow through close almost at the lows, not quite at the lows but look at the volume of that price move, so that price move continued.

When you get such an extension too far below that moving average, if you look at it the price got a little bounce. We get a little bounce but overall right here stock is acting weak, and in fact if you really look at it the stock has been kind of acting weak since right here. We have this tapping effect that's the behavior cause I'm taking in account the other prices.

As we get into these next levels and I'm trying to evaluate what's happening in the next few days, looking at this now being my resistance level. Again looking at the chart, looking stock price closes towards the lows, volume still pretty high, so the volume still fairly good.

This one this bar stock price closes at the highs so they brought it back but could it be short covering, you still have some volume. Then again you have more volume coming in on the sell side, volume picking up even heavy which tells me there selling action again at least for the short term.

The balls will try to bring it back, that's what they do to retest this level. This is the key level but if they can't do it then look what happens, we get the breaks. Now, I wonder during this bar what will be the next day price action?

We open up at the lows, we close not at the highs, we close in the middle. But what happen throughout the day?

If you watch this bar and you look at it, we open at the lows, we attempt to get into the highs but then we start selling off towards the rest of the day and we close in the middle. Now we all continue selling but then what do I expect to happen? Well, we open now if we look at it now we open right there just a little under that closing price and we get that follow through because this had large volume and we get a follow through with large volume. And that's why from this bar you could see whats going to happen on that next bar. Because I told you even though it didn't close at the lows it told you at the stock opened here try to get here to the highs, rejected those highs to closed right around this level then the next day action because of that volume was going to follow up the same way.

Now when you get into lower prices and it becomes favorable away from that moving average, you'll get that snap back and that's what we got. You can tell that these things and this motions specially at critical point and time like this levels right there you could tell about the stock from this point to the next point and from this bar you could project the next bar.
2016-09-15-factor-overnight-action-next-day-243
That well tell you some more clues and insights to how the stock is behaving. If you get more volume like you do with Apple, it's pretty easy to tell, its a lot more clearer picture. Most of the time you don't get that clear picture. Sometimes you do on the sell side, even here on Apple, you'll see right here we got a bar moves down, closes at the lows so what do we get continuation, volume picking up fairly majorly. I expect prices to continue moving lower even for the nest few days because of the large amount of volume that's coming in into that stock.

That's typically how I'm watching and looking at this price levels as evaluating stocks. I'm not just looking at overnight action or what happen in Europe, I'm looking at the day to day action because that's going to tell me a lot more. There's a lot more shares traded at those price levels or during the day than just overnight.

Of course, overnight action the future, they can move the stock. But if you put together the bigger picture multiple weeks, multiple day support resistance lines, that will tell me a lot more as well as how that stock moved throughout the day. That tells me some insight of what's going to happen to the follow through.

Now, One key point you want to keep in check is over extension levels, too much to the up side you probably see it come back. To much to the down side you probably see it snap back. Those are some things and keys that I watch and I hope this was helpful and if it was and you wanna see more videos like this one go ahead and check me out at tradersfly.com where there's other frequently ask questions on video.

My primary website is tradersfly.com so take a look at that website because it has a lot more resources on it. If you want to get on news letter list then click this button right up here and you'll be taken to the sign up page. And on the news letter list I send out some trainings, discounts, promotions I don't usually do that frequently so make sure to get on the newsletter list if you wanna stay up to date with me or of course you could watch some more training videos right here on this side of the page. Thanks again for joining me in the end remember "Do what you love contribute to others but most importantly live life abundantly".

I'll see you next time.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

Join over 31,258 regular people who are bettering themselves in the stock market.

Click Here to Sign Up

This is a community that is motivated to learn & improve their skills.
Join us and get free training lessons, freebies, and exclusive promotions.

want some helpful advice?

pay per minute coaching

I am scheduling helpful coaching sessions for people who are interested in real-world advice & guidance where you only pay per session. No long term commitment required.

Learn more
This website and content is for information purposes only as Rise2Learn, TradersFly, and Sasha Evdakov are NOT registered as a securities broker-dealer nor an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Rise2Learn, TradersFly, and Sasha Evdakov cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Rise2Learn, TradersFly, and Sasha Evdakov in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Rise2Learn, TradersFly, and Sasha Evdakov accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.