Attention Traders: Are You Trading with Blinders On?
Hey there, traders! If you’re not using Level 2 indicators, you’re basically trading with your eyes closed. Today, we’re diving into the world of biotech stocks, specifically focusing on DRMA, a small company with big ideas. Let’s break down how to use Level 2 to make smarter trades and why DRMA is a stock you should keep an eye on.
What is DRMA?
Meet Dermata Therapeutics
Dermata Therapeutics, ticker symbol DRMA, is a clinical-stage biotechnology company founded in late 2014. They focus on treating medical and aesthetic skin conditions with high unmet needs. Their innovative approach has caught the eye of many traders, and today, we’re going to see why.
Why Biotech?
Biotech stocks are hot right now, and DRMA is no exception. This company has been making waves with its cutting-edge treatments, low cost per share and small float, making it a prime candidate for big moves in the market.
Analyzing DRMA with Finviz
The Pullback
Using Finviz, we can see DRMA experienced a significant pullback up to August 1st. Despite this, the stock has been trading regularly, recently with a relative volume of 19 times its usual. This kind of activity indicates a potential squeeze, making it a stock worth watching.
The Morning Squeeze
On a recent trading day, DRMA squeezed up from $1.72 to a high of $2.70 in the morning, pulled back, and then surged again after hours. This volatility presents both opportunities and risks, which we’ll explore using Level 2 indicators.
Trading DRMA with Level 2
The Open
Let’s dive into an example of trading DRMA right at the open. The Level 2 screen shows the bid on the left at $2.80 and the ask on the right at $2.73. This tight spread is ideal for trading, minimizing slippage.
The Battle
As the market opens, we see a battle between buyers and sellers. The stock starts to recover, with more green prints indicating buying pressure. The price climbs to $2.82, showing positive momentum.
Key Indicators
I prefer to enter a trade after the stock clears several key moving averages: the 9 EMA (yellow), 20 EMA (blue), 50 EMA (purple), and the 200 EMA (dotted line). Additionally, the VWAP (Volume Weighted Average Price) is crucial. When a stock is above the VWAP, it indicates strong positive volume, and that the bulls are in control!
Making the Trade
Once DRMA clears VWAP, I make my move, buying at $3.50. The stock quickly halts at $3.65, a sign of rapid movement. Halts can be nerve-wracking as they often lead to quick pullbacks or further surges.
The Halt and Aftermath
After the halt, DRMA pulls back as expected, but I place a limit sale at $4.80, anticipating a push back up. The stock struggles but eventually hits my target, and I secure my profit.
Final Thoughts
Trading DRMA with Level 2 indicators can be incredibly rewarding but also risky. The key is to make calculated moves. If you enjoyed this breakdown, give us a thumbs up and subscribe for more trading insights. Share your thoughts in the comments below and check out our next video on another hot biotech stock!
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