This strategy was developed several years ago as a way to disinguish between a bogus gap up (which is likely to decay), versus genuine buying interest (which is not likely to decay). The answer to this problem was the Staircase to Heaven. Basically, it is when a stock reaches a session high after the first 30 minutes, or 10AM-eastern time. It is accompanied by above-average volume.

It must be clearly noted that the Staircase to Heaven needs to have both factors, which is (a) High volume, relative to yesterday's session, and (b) At its session high 30 minutes after the opening bell. Additionally, the market has to have a general bullish tone and running in positive territory.

A storybook example of the Staircase to Heaven. After the first 30 minutes,
the heavily traded stock is at its session high. Notice how it takes off for the remainder of the day.

Notice the example of a classic Staircase to Heaven play in the above illustration. After very heavy volume (relative to the previous session), GENZ reaches its session high about 30 minutes after the open. The stock proceeds to ramp up for the day for a cool 3% gain.

Below is yet another example of the Staircase to Heaven the occurred in the same trading session.

In the above example for ADSK, volume is visibly heavy, relative to the previous session. After trading for 30 minutes, ADSK is at its session high, so it qualifies as a Staircase to Heaven. Notice how it takes off, reaching a whopping 7% gain from the point you would have entered the trade to its high.

Why the Staircase to Heaven Works

The Staircase to Heaven is a way to locate where the big investors are putting their money. Generally, the inexperienced ("dumb") money enters the market near or at the open, and in most cases, the stock will go in the opposite direction as the "smart" money exploits the action. If a stock gaps down at the bell, for instance, smarter traders swoop in and drive it back up. Similarly, stocks that gap up (open higher) are frequently exploited by short sellers, and the price decays.

In the case of the Staircase to Heaven, however, the fact that the stock improves during the same time period, and with heavy volume, indicates that there is a genuine interest in the stock from the heavy hitters, and the money is not coming from the inexperienced public. Had the stock been trading only with early, "dumb" money, it would be trading at lower volume, and/or it would have been unable to make a session high during the first 30 minutes. (The next page will show some examples of stocks that fail to rally, because they did not have the proper signals).

One additional reason why the Staircase to Heaven is effective is that other traders, noticing the increasing momentum, join the bandwagon, and the stock takes off. Hence, this particular strategy can produce excellent results during very bullish sessions.

When the market turns bullish, there are usually stocks that are tempting to play in the early going, yet if they do not show the proper signals, your trade is likely to fail.

The following is an example of a stock that is "almost" a Staircase to Heaven play, except it fails to reach a session high after the first 30 minutes.

Example of a failed rally. While JCOM (above) had heavier volume than
usual, it failed to make a new high during the first 30 minutes.

Notice the failed rally for JCOM in the above chart. Although it qualified with high volume, it failed to make a session high after 30 minutes of trading. This indicates that the big ("smart") money is not that interested in the stock, and JCOM goes on a decisive downslide.

Another interesting point about JCOM (above) is that this failed rally occurred on the same day as the two winning examples (GENZ and ADSK) .

Another example of a possible Staircase  to Heaven that fails to qualify (volume is too low).

The above chart is another example of how the Staircase to Heaven will fail if it does not meet both qualifications. In this example, BSTE hits a session high, but its volume is very weak (relative to the previous session). This indicates that the big money is not all that interested in the stock. Notice how the stock promptly tanks for the better part of the session, immediately after it hit its "high".

Again, BSTE (above) occurred on the same day as the winning plays shown on the previous page.