This is a clear indication of a very weak stock that has further downside ahead. The position must be eliminated. If the price does not trade below the low of the first 30 minutes, use a trailing stop for the remainder of the day. Here s one method that involves keeping a protective stop just below the bar of the last period. Repeat this until either a target objective is met or a trailing stop is hit.
Some traders forego a trailing stop and instead keep their stop at the low of the disaster day.
Their view is that as long as the stock remains above the low of the monster gap-down day, this point can be considered to be a climactic bottom. Sometimes this approach improves the outcome. If you do this, however, understand that you are risking the opportunity to narrow your loss. This aggressive strategy often helps the professional trader to further narrow his loss, especially if the stock is gapping down, while the overall market is trading sharply higher. However, it must be realized that the same five-minute sell rule stays intact.