How To Trade Stocks Reacting To News

On April 13th, AAOI gapped up more than 10% on company news. But the news was just fluff! So after the jump the stock faded the entire day dropping from $50 to $45. This jump formed a gap fill area for AAOI between its April 12th’s close at $40.82 and April 13th’s $45, a $4 range. If the stock broke below $45, it had the potential to drop all the way down to $40.82 in a matter of days. When you see stocks reacting to news, it can offer some of the best plays of the year.

Gap Fill – AAOI’s Bigger Picture

On April 17th, AAOI gapped up slight at the open and put in a dead cat bounce intraday. After the fake spike up, the stock broke back down underneath its VWAP. Right here we shorted it at $45.69 at 9:42 AM with a stop above the high of the day at $46.50. Sure enough AAOI dropped, putting in a new green to red setup. So, I added to my position at $45.28 at 9:45 AM. AAOI continued to fall and I scaled out of the move at $44.91 and $44.80. Throughout the rest of the day $AAOI continued to setup bear flag after bear flag. Naturally, we traded it a couple more times ending up with more than $800.

Sometimes we have to focus on looking at the news and trying to figure out on the bigger picture, what should be happening. It’s important to have a thesis behind your trade and guide your decisions. Remember, you’re only as good as the stocks your trade.

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. We’re having an exclusive spring time bonus for our intensive 60 day course where we teach you exactly how I trade and why for only $2300. Not only that, our bonus also includes 6 months of free chat access and a Special Live Platform Setup Class on May 1. This deal is only for a limited time so to learn more or signup, email me at today!



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