Obey This VWAP Rule on Post-Earnings Bull Gaps

Happy Monday, VWAPians!

Boy, last week was a fun one for us, wasn’t it?

Not only did we have an EPIC Primetime Launch Party for the new Money Morning LIVE Network…

We also crushed our fair share of VWAP day trades on earnings!

For instance, on Wednesday, Aug. 11, you watched as I stalked Altimmune (ALT) for a successful earnings reversal in just a matter of minutes.

Announcements from my Aug. 11 LIVE trading session

Even more recently, I predicted that Walt Disney (DIS) shares – which initially gapped higher after earnings Friday morning – would lose some of that steam…

And, of course, I was right, because I’m The Warlock and EVERYTHING I SAY IS IMPORTANT, BLANCHE!

But really, the DIS reversal presents yet another opportunity for me to teach you one of the VWAP rules I play by during earnings season.

It’s a fairly repeatable pattern that I witness almost daily, and one you should be watching for this week.

Speaking of, I’ll also go over some of the stocks that could be in play for me after earnings in the next few days – including new Wall Street darling Robinhood (HOOD) – and the sector that could command attention this week.

In the meantime, don’t forget to catch an early glimpse of my daily Warlock Watchlist on the pre-market Money Morning LIVE hour at 8:30 a.m. ET, and catch my full hour of LIVE trading at 9:30 a.m. ET right here.

Obey This VWAP Rule During Earnings Season

On Friday morning, shortly after the open, I alerted you that I was watching DIS for a potential short play after earnings, even though the stock’s knee-jerk reaction was to the upside.

Announcement from my Aug. 13 LIVE trading session

Specifically, DIS shot higher after the close on Thursday, jumping from roughly $180 to an after-hours peak just shy of $190.

However, while many other people were cheering Disney’s fundamental strength, VWAPians don’t care how many Loki nerds the company got to sign up for Disney+ last quarter.

FUNDAMENTALS DON’T MATTER TO DAY TRADERS, because we’re playing the CHARTS, we aren’t INVESTING.

And the charts were telling me not to bite on a bullish DIS position out of the gate.

Why?

Because the Kenny Glick Knowledge Bomb Playbook (no, it’s not real, don’t blow me up) dictates that you should Never Buy Stocks That Gapped Up When They’re Breaking Back Below the VWAP!

Click here for all my Knowledge Bombs thus far

After failing to break above $190 in pre-market trading (the shaded gray on the left in the chart below), DIS shares lost some steam, giving back some of their early lead to open around $187 Friday.

The first 15 minutes of the session were pretty choppy, which is why I often tell my fellow VWAPians to take a breather at the opening bell and let the early volatility settle a bit before jumping into a trade.

And when I saw DIS get rejected at that $187 level early and BREAK BACK BELOW THE 1-MINUTE VWAP (blue line), well, I was getting interested in a bearish position – especially if we saw a definitive break below the round-number $185 level.

DIS 1-minute chart on Friday, Aug. 13 – courtesy of Thinkorswim (TOS)

After a stock gaps higher on earnings outside of normal trading hours, when the session finally opens, many pre-market traders are looking to take their profits out of the gate. So giving back some of those gains at the open isn’t outside the norm.

But when you see a stock moving back below the 1-minute VWAP, that means the SELLERS are now in control, and buyers should be careful.

So remember that lesson this week, as we see some of the last earnings stragglers this season.

Stocks to Watch This Week

Speaking of the earnings calendar – which you can find near the bottom of the ThisIsVWAP.com home page – several names could pop up on my radar this week after they report.

Check out the earnings calendar on ThisIsVWAP.com

HOOD could garner some attention after its first quarterly report as a publicly traded company. Some of you might remember the epic trades we put on around the HOOD IPO recently.

Outside of that, we have some heavy hitters in the retail sector reporting next week, including Home Depot (HD), Walmart (WMT), Lowe’s (LOW), Target (TGT), and others.

And then look for a few tech names to make noise, including Cisco Systems (CSCO) and Nvidia (NVDA).

Of course, nothing is ever guaranteed to be traded – it all depends on momentum and volume – but earnings are usually my top priority.

The only way to know what The Warlock deems WORTHY of a day trade is to watch me do it LIVE at 9:30 a.m. ET each day right here!

And stay tuned for an announcement on another SPECIAL TRADING SESSION coming up later this week…

See you in the room,

Kenny “The Warlock” Glick

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Comments

One response to “Obey This VWAP Rule on Post-Earnings Bull Gaps”

1. Looking forward to your insight!
   trading earnings based on logical sound fundamental expectations
   is a thing of the past.

   Reply