I may be chillin’ at the biggest casino in Bermuda this week, but EARNINGS SEASON in THIS market is the REAL casino for VWAP traders, baby!
Catch Felix & Oscar at 8:30 a.m. ET each day right here
In fact, yesterday morning, I told my Money Morning LIVE crew that Goldman Sachs (GS) stock is notorious for selling off on good earnings, and for would-be short sellers to watch out for that Finger of God pattern…
And wouldn’t you know… The GS short trade was VWAPians’ Christmas, Hanukkah, and Kwanza, delivered in one pretty little package.
Like I always tell you when we’re trading LIVE – EVERYTHING I SAY IS IMPORTANT!
In fact, GS presented a great trading lesson for my son, who is about to be a college finance major and is learning the VWAP ropes…
Blowout Numbers? No One CARES, BLANCHE
Unless you’re totally new to this trading game, like my son, you’ve probably at least heard the expression, “Buy the rumor, sell the news.”
While I’m not one to live and die by crusty Wall Street adages (like “Sell in May and go away,” for instance – gross), this is one that still holds water.
In fact, even in Bermuda, almost everywhere I went recently was all about Richard Branson and his precious little Virgin Galactic (SPCE) rocket ride.
Recent SPCE headlines told me a sell-off was likely coming
The stock had been moving higher heading into the launch, and enjoyed a few big bull gaps amidst the anticipation.
But once the launch itself happened and was widely considered successful, SPCE shares sold off – partly because most of that good news had already been baked into the price!
Daily chart of SPCE – courtesy of StockCharts.com
It was a similar situation with Goldman Sachs stock headed into earnings.
Look – we knew Goldman would report blowout numbers… but SO DID EVERYONE ELSE.
So when the bank reported earnings and GS stock initially gapped higher, I started licking my chops.
I knew that if there was a bull gap and GS started to sell off (on the news!), once that gap closed, we’d see even more selling. That’s because people don’t want to lose the money they’d been sitting on prior to the earnings announcement.
In other words, GREEN to RED spooks everyone. These traders clutch their pearls and shout, “Oh no, my profits!” And savvy day traders are here to take advantage.
So with Goldman, I was looking to wait for the 1-minute VWAP (blue line) to hold the first time, and once the stock rolled through to the downside, that’s when I wanted to make a move as a short seller.
It was the trade of the century for nimble VWAP day traders, and I hope you got a piece!
Zooming in on the GS fade after earnings
In conclusion, there are a couple takeaways for you:
- Never trade on headlines alone. Use them as a catalyst for volume, but let the VWAP tell you if you’re right or wrong. Fundamentals don’t matter in this game!
- THE FADE is just people taking advantage of gaps – and I have a feeling that we’re about to see a lot more of them this earnings season. In all my years of trading, I’ve never seen the fade work so well as right now.
But I’m also going to throw in a bonus takeaway, because outside of earnings reversals and Tuesday’s UVXY warning that came to fruition, I’ve also been right about the recent PSYCHO STOCKS getting pumped & dumped… stocks like MediaCo (MDIA) and TranscoTherapeutics (RNAZ) that were on yesterday’s daily Warlock Watchlist.
These pump & dumps were so drastic, it feels like a good time to remind you that these types of stocks are not for investing. In MY house, VWAPians are day traders looking for a fling – we’re not trying to get married to these names.
Make sure you circle back at 8:30 a.m. ET again tomorrow, where I’ll once again try to check in on Money Morning LIVE from the beach!
In the meantime, I’ll be watching earnings reactions from fellow bank stocks Citigroup (C), Wells Fargo (WFC), and Bank of America (BAC) today, along with Delta Air Lines (DAL), while stocks like Morgan Stanley (MS), Charles Schwab (SCHW), and UnitedHealth (UNH) will be on my earnings radar on Thursday.
See you soon!
Kenny “The Warlock” Glick
One response to “Goldman Just Set the Tone for Summer (Here’s What That Means)”
July 14 2021