Just like Tuesday, there was only one stock you needed to be watching yesterday.
But unlike Tuesday, where we had to pounce at the open…Yesterday was a waiting game.
My LIVE hour of trading started at 9:30 a.m. ET… and the setup wasn’t there.
That’s okay, let other people get chopped up.
With a little patience, Micron (MU) gave us a Dip-and-Rip setup on an earnings reversal.
Blue Line to Orange Line
- Focus on earnings
- Focus on VWAP
- Be patient
If you followed this advice yesterday, you would have seen and, hopefully, taken advantage of the dip-and-rip earnings reversal in MU.
But you had to be patient. It didn’t actually set up for a full 10 minutes…
“But Kenny, I can’t help it… As soon as the market opens I start pushing buttons.”
I “can’t even” with you right now, Blanche. You’re pushing my buttons is what you’re doing.
If there is no trade setup… There is no trade!
Today, I’m going to walk you through the setup in MU.
Why… it was a buy in the premarket, a non-trade at the open, and then a buy again 10 minutes later.
That’s a lot, but when you see it… it’s clear as day.
Don’t rush, just keep learning until it’s as natural as breathing…
NO SETUP, NO TRADE
In my last post, I went over the VWAP break on an earnings reversal in Aurora Cannabis (ACB).
So you should know the requirements of an earnings reversal.
Quick recap – When a stock gaps down on earnings and breaks back above VWAP, we buy it.
Simple enough — so now for the pop quiz.
Should we have been buying Micron (MU) at the open yesterday?
Come on, you know the answer…
It’s a big fat No…
No, Blanche! Not yet.
If the stock is gapped down after reporting earnings, we look to buy.
MU was gapped down after earnings yesterday, so it must be a buy, right?
Not so fast…
When do we buy, though?
When the stock breaks back above the 1-minute VWAP.
MU is above VWAP at the open — so we buy, right?
Not so fast…
What’s the setup, Kenny?
A stock opens down on earnings… and breaks above the 1-minute VWAP, Blanche!
Not “a stock opens down on earnings… and is already above VWAP.”
Everything’s an IF/THEN statement.
IF the stock gaps down on earnings and it breaks back above VWAP, THEN we buy.
IF it breaks this level, THEN we look to this level, and so on…
Yesterday MU gapped down, but opened above VWAP — and we can’t have an earnings reversal without the VWAP break.
And what do we do when there isn’t a setup?
We don’t make a trade.
Sit on your hands if you have to… I don’t care, just don’t push those buttons.
PATIENCE IS REWARDED
First another test of your patience with a quick backtrack to the pre-market.
Just because MU didn’t give us a setup at the open… doesn’t mean there was no trade.
Kenny you’re confusing me… I thought you said there was no setup?
Not at the open, Blanche!
But MU didn’t gap down and just magically appear above the VWAP.
It happened in the pre-market.
Look, the stock is down on earnings… We have fully established this.
It breaks above the VWAP for a potential earnings reversal trade.
Looking at the chart below, you’ll see the range I gave you in the 8:30 morning show.
It’s easy to get chopped up when a stock is trading in a range… don’t let it happen to you.
To keep that from happening to us… We would want to buy MU when it gets above VWAP AND breaks above the range.
And then we simply sell into the move, as per ALWAYS.
Pre-market break above VWAP
So you locked in those pre-market gains, right? Right?
Come on, Blanche… paper trade until you get it.
Now, back to the open when most of you joined me LIVE.
IF you were in on the pre-market move… you were out when it broke back below VWAP.
If you weren’t in on the pre-market move, TRYING to get in at the 9:30 open was a big NO, since the stock opened above the 1-minute VWAP — I was very clear about that.
Well I thought you said if it’s down on earnings we buy it?
No, Blanche, if it’s down on earnings and then it breaks back above VWAP we buy…
So what do we do then, Kenny? I can’t sit still, I need to push the buttons?
If you NEED to trade, then you NEED to paper trade, until you learn some self control.
We don’t NEED to trade, we get to trade… when there’s a setup.
When we don’t have a setup – we wait.
With a little patience, 10 minutes to be exact, MU actually gave us the in-session setup we came here for…
I hope you didn’t go back to bed… or you missed it.
Look at the chart…
You know what that is called?
The Dip & Rip… aka the Checkmark of the Lord.
Here’s how it goes…
MU tried to go up, then traded down below VWAP, hit support at the bottom of the pre-maket range I marked on the chart earlier (red lines), then made its move back up.
When it broke BACK ABOVE VWAP… we finally got our earnings reversal trade (courtesy of a dip & rip).
Chart: courtesy of thinkorswim
Let’s get ready to stalk our next trade.
Join me LIVE at 9:30 a.m. ET for another great day of trading.
It’s going to be a fun one as always.
Kenny “The Warlock” Glcik
September 30 2021