On March 20th we saw one of our favourite setups, the Gap and Go. This type of behavior is when a certain stock releases an unexpected news report to the public and traders react strongly. As a result, the stock can gap up and continue higher, especially in the first emotional hour of the trading day. This is also a good indication for the breakaway gap setup for swing traders.
Gap and Go Trade Example
Our prime example is $ESPR, a biopharmaceutical company released news of its drug the previous night. It turns out the FDA recently approved of one of its key drugs in after a positive clinical trial. For a pharmaceutical company, any positive FDA news report is great news. Overnight the stock jumped 27.33% with a lot of premarket volume behind it.
Right out of the gate $ESPR started showing strength. Looking at ESPR on the 1 minute chart, you can tell that there was a lot of bullish sentiment in this stock with a lot of opportunities to trade. The first setup was an Opening Range Pattern (ORB) with an entry at around $33.70. If you missed that one, another ORB developed immediately after at $34.20. Right before 9:45AM, the stock then develops a bullish flag pattern and makes a great pop once the stock broke $35.00 and continues to move higher to $36.00 then $37.00. All you needed to do was scale out of your position along the way. Many traders in our chat started with a comfortable profit within the first 30 minutes of the trading day.
Later on, $ESPR turned out to be one of the biggest movers of the day. After breaking out a flat top breakout setup above $37 it ran all the way up to $42.50. This was definitely the hot stock to trade for the day.
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