Earnings are life and blood and VWAP trading because they bring enormous amounts of volume into individual names.
And one of the best things that can happen to stock for us is if a company misses or overperforms from what the market expected.
This can create double-digit percentage gains or losses in a company's stock. The stock rising is called a gap up and the stock falling is called a gap down.
Of course, we never buy or short a stock before earnings are announced.
We wait and see what happens to the stock after earnings are announced, and then create our plan from that movement.
If a stock is gapped up, we plan to short the stock. And if it's gapped down we plan to buy it.
It may seem counterintuitive, but even if a stock beats earning expectations, there's a good chance that the stock will swing the other way during the next trading session.
The reason for this is pretty simple.
A stock that's gapped up has investors cashing out on their long position. They sell their massive lots of hundreds of thousands of shares and cause the stock to plummet back down.
Likewise, a stock that's gapped down after earnings or news has shorts covering their positions for a profit. They buy back the stock after shorting it, and cause the stock's price to rise.
It's all about profit-taking and price.
Investors don't care if the company cured cancer. They only care that their position is profitable. And once it is, they take their money off the table, artificially moving the stock price.
Just look at what happened today with SOFI as I covered it in Warlock's World.
Click here or the video below to see what I'm talking about...
Every night, there's this fear in the back of my head that these trades are suddenly not going to work.
And then the next day, the same thing happens over and over again...
A stock reports earnings, it gaps in one direction, and then during the session, traders take their profits on the stock and make it go in the other direction.
So, right now I want you to follow these steps:
1. Look and see what companies are reporting earnings after the close today, and before the open tomorrow.
2. Make a plan on how you're going to trade it tomorrow morning (if it's gapped up, plan to short it; if it's gapped down, plan to buy it)
3. Wait for VWAP to confirm your plan, and execute it tomorrow morning.
It's that simple.
SOFI is just one example of thousands of earnings reversals I've seen in my career.
And since we're still in the middle of earnings season, you have the shot to get in on plenty of potential earnings reversals coming up.
One of the best ways of course to get notified of earnings reversals and trade alongside me is to join me in the Warlock's World.
We're live every morning the market is open from 9:15 am - 11:00 am, and plan to target plenty of earnings reversals this week - including a big one with Apple (AAPL) reporting after the close on Thursday.
You'll want to get in before that happens. So click here now to join me in the Warlock's World.
The post Do this trade every day and don't look back appeared first on This Is VWAP.
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