Put This 3-Step Pattern in Your VWAP Toolbox
When we’re knee-deep into earnings season (like right now), I try to make earnings plays my first priority, because the news is already OUT and the shares are liberated, so to speak.
In fact, the VWAP earnings reversal play has been absolute FIRE so far in 2021, so consider me always on the hunt for patterns like the Finger of God and the Checkmark of the Lord – the latter of which we witnessed in American Airlines (AAL) as I was LIVE trading this morning.
After my LIVE trading hour this morning, I spotted something exciting on the post-earnings Cleveland-Cliffs (CLF) chart.
It’s a 3-step pattern that should be in EVERY VWAP day trader’s technical toolbox, and CLF presented the perfect opportunity to teach it to you.
Which is why I made a special follow-up video just for you, AND broke it down step by step for you right here…
Because when you see a stock making this move, it’s often a strong signal to be a buyer.
Breaking Down the Fo’ Sho’ Bro’
Those of you who haven’t watched me trade LIVE each morning – what are you even DOING with your lives?
I kid, of course, but the best way to truly absorb the power of the VWAP trade is by watching it in action, so set your alarm and quit your job* if you have to, and catch me on Money Morning LIVE starting at 8:30 a.m. ET, followed by an hour of This Is VWAP at 9:30 a.m.! (*Legal says do NOT do this.)
For those of you regularly joining me LIVE (i.e. – the good kids), you’ve undoubtedly heard me talk about the Fo’ Sho’ Bro pattern several times, and today I’m here to break it down step by step.
In fact, I made you a video about a DOUBLE Fo Sho Bro spotted today in Cleveland-Cliffs (CLF) after earnings.
To begin, “Fo’ Sho’ Bro” stands for Fakeout, Shakeout, Breakout.
Watch for this pattern when shares are consolidating above a key level of concern, like a pre-market low that you’ve drawn on your chart (my lines of importance are drawn in red).
- The stock dips below the 1-minute VWAP and a key price level, but it’s a FAKEOUT because it quickly recovers (sometimes in the same candle)
- A subsequent downside break triggers the algos, and people get SHAKEN OUT of their positions
- The shares BREAK OUT above the previous candle and the 1-minute VWAP, causing short sellers to buy back their borrowed positions (and the stock to jump)
In the accompanying video, I walk you through the bigger FO’ SHO’ BRO pattern that happened on CLF out of the gate, but I also want to point out the more subtle pattern that only eagle-eyed traders might’ve spotted later today…
Notice the volume spike (bottom of the chart) that accompanied that drop below the 1-minute VWAP, and the tail of the candle that crept over the pre-market low (red line). That was a FAKEOUT.
Then, notice the more defined (but still relatively quiet) dip to new lows, triggering the SHAKEOUT.
Finally, look what happens just a few minutes later, when CLF finally BREAKS OUT back above the 1-minute VWAP!
However, in order to best capitalize on this trajectory, you need to stay nimble and laser-focused… and remember – if you don’t get in the first time, just wait 20 minutes!
I’ll see you all back at 8:30 a.m. ET on Money Morning LIVE, and then we’ll dive deeper into the next batch of earnings stocks during my LIVE 9:30 trading hour, right here.
Talk to you soon!
Kenny “The Warlock” Glick
One response to “Put This 3-Step Pattern in Your VWAP Toolbox”
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July 22 2021
Leaning so much from you as a newbee! I thank God I discovered the VWAP reversals from you!
A question I have is which listed “options” are we looking for to trade in these reversals? Close to or in-the-money already? Is there a “day option” that I’m not seeing on the list like in the CLF trade?