Earning season is in full force, this is the time when we mostly day trade stocks that are gapping up or gapping down after the earning was announced. There many web sites , where you can find stocks that are moving pre market after the earning was announced. Before the market open today, we found quiet a few stocks that were gapping down below nearest support and major moving averages . CRUS and RL, two stocks that we shorted for some nice gains.
I'll go over the intraday charts to show how we short these earning news gap downs. So we want stocks that were gapping down below nearest support and major moving averages .After open we wait for stock to build an opening range via 5 minute or 2 minute orderly candles . The range could be one or more 5 or 3 minute candles but they must stay below opening range high.If the stock, breaks above that opening high, setup is basically over and move on. Also We don’t want see crazy spike and wide range.If you see that, just move on to next one. We will be watching to short the stock as long it stays below initial opening range high with stop above opening range high.
1.We have 5 minute opening range. Stock staying below opening range high 57.45.
2.You can short on 2nd candle if it’s below that 57.45 or you can wait until stock break opening range low 56.31
If you missed the initial opening range play, you can wait for 1st bounce to 9 or 20 EMA or VWAP or previous support ,creating a bear flag pattern and a break below EMA and VWAP. In this case stock bounce to previous support. opening range low 56.31 and broke below bear flag giving another shot at shorting again.
3.1st bounce to previous support and break down bear flag below 9 EMA ,gave another chance to short again.
RL, basically same setup.
MLNX another stock that gapping down but we passed, reason "crazy spike and wide range".
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