In a recent webinar we talked about how to play the late day fizzle setup and today on May 24th, we saw this exact same setup. Playing earnings gap down shorts is a big part of what we do. This late day VWAP fizzle is my bread and butter for making profit on stocks.
Before the market opened, TIF came all the way down following its poor earnings report. Recently, these retail stocks have been gapping down and fiddling around at the open. But once the open is over, the midday move comes and you get this short squeeze. Remember you have to let this squeeze fizzle out and at some point the stock will eventually make some sort of lower high. This is when the stock will give you the signal to look short.
Never short stocks blindly. After the squeeze TIF broke down into the 20 EMA, developed into a bear flag, and made a lower high. This was the time to short. As TIF continued to crack I add into the position and when it based, I added some more. The amount I add is never huge, just a few hundred shares at a time. As the stock proceeds to make lower lows, of course I’m covering along the way.
But later TIF finally brakes underneath the VWAP. That’s your VWAP fizzle. If the stock breaks underneath this line into the afternoon hours, there’s a good shot that TIF will continue to fizzle into the close. That’s exactly what TIF does as it broke down into the $84.80s.
Remember this is a simple setting. All it takes is to just waiting for that short squeeze to go, and then waiting for that fizzle. The retail sector has been getting smoked and we’ve been stalking them every day. We always look for stocks that have missed earnings, clean daily charts, and have gapped down. I measure the float, the history of the stock, and then separate my day between the open, midday, and end of day.
If you’re not sure of the setups and price patterns 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 email@example.com today!