Our favorite type of trading throughout the year is earnings season. If you’re familiar with our style, you’ll know that a lot of it is based off news and momentum. Ideally we take the fundamentals, such as company news or earnings release, and marry it with what we know about the stock’s technicals to get our perfect intraday entries.
Gap Down on $KITE
On May 8th, we made a great trade on Kite. We never place these trades before earnings, because that would make us gamblers and not traders. Instead we wait for the news then trade after the release. What we saw today in KITE is called a post earnings drift and a very powerful move.
Looking at its daily chart, Kite has been in a tight wedge for months, but today it had an earnings statement out. After scanning for gappers in the morning, KITE showed up on our radar. Once I see the gap and the market opens, I don’t immediately short it but I wait for an intraday pattern. One of my favorite patterns to play is the opening range breakdown and KITE developed one in the first five minutes. As the stock broke down I shorted it at $73.26 for a few hundred shares and boom! We immediately got this drop down to $71 and I covered my position into it. Opening Range Patterns are meant to be quick and it will happen in minutes.
As our day starts to progress, we wait for secondary patterns. As the stock started to retrace I’m just looking for the next bear flag. Once it broke the trendline, I shorted another 300 shares and first spike down I cover 100 shares, then another 100, and then the next. The stock gave us yet another bear flag immediately after for the next opportunity.
That’s the awesome thing about earnings plays. Once the stock is in play, it gets a huge volume spike due to the news. Fresh news have order flow that’s independent from the market and so you're actual intraday patterns will work cleaner and faster than regular technical patterns. Every day, we’re looking for gappers to play.
If you’re not sure of the steps and practices that we’re talking about you can learn them all here at our Bulls Bootcamp. It's an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at firstname.lastname@example.org today!