Xil, the prerequisites for a good potential intraday bounce look something like this:
1. Good liquidity. Need enough buyers to move the price significantly during the day. I stick mainly to the mid-caps and more liquid specs.
2. Good trading range. The wider the average range, the easier it is to harvest a few points in any bounce. I don't try to pick the bottom or the top, just hitch a ride for a few points along the way.
3. Big fall. This is a variable that should be adjusted to reflect the trading conditions pertaining that day. Look for shares that appear to be oversold relative to the overall market. In other words, shares that are being treated particularly harshly in the absence of any alternative explanation. (But be market-savvy - for instance shares like BBG and JHX are particularly exposed to the US economy and therefore are likely to fall harder than most today.)
4. Major support. This is crucial. Know in advance where the support lies for your targets and wait until the support has been tested and has held before buying. I set price alerts just above support levels, so I know when a share is nearing the target price. Mind you, on days like this, alerts can be counter-productive when a dozen go off at once!
5. Good track record. One obvious clue to how each individual share is likely to perform today is how it has performed on the last few "big red days". Look for shares where weakness attracts buyers, ignore those that finished at the bottom of their trading ranges. Previous form is no guarantee of future behaviour but it improves the odds of a successful trade.
6. No market-moving news to explain the fall. This is essential. Support levels count for little if the news is bad enough.
I have about a dozen "go-to" shares on days like these that I look at first because they have been fairly reliable bouncers in the past. You'll forgive me for keeping a few to myself but the list includes the likes of MGX, AGO, LYC, CGF and LNC. A little research would produce many more candidates.
One final thought: trading in my opinion is all about probabilities and psychology. I look for set-ups that favour a positive outcome, but there are no guarantees and I expect some losing trades. If I buy four shares I expect to lose on at least one and that expectancy makes it much easier for me to cut losers adrift and live to trade another day.
Hope this is useful - happy to expand on anything here, time permitting.
