The One Trade That You Need to Add to Your Arsenal
We have one trade that works nearly every single time.
And that’s trading after earnings reports around the VWAP.
It’s a simple three-step process of…
1. Did the stock report earnings
2. If yes, is it breaking VWAP
3. If yes, then I’m in.
You look to see what the stock is telling you.
And a lot of times after the initial couple minutes of the day, you’ll have an understanding of where it wants to go.
Take this morning’s example of Draftkings (DKNG) for instance…
What you see in the chart above is the 1-minute chart for DKNG.
The stock did what’s called a dip and rip.
It dipped below the VWAP, couldn’t continue rolling over, and then ripped right back up.
Let’s say you shorted it at the VWAP though.
Shorting it at $20.00 made you upwards of $0.40 on the way down if you covered your position into the move down.
It was a quick move, but it was doable to do both sides of the trade. Setting your stops in immediately and setting your risk going into this trade would have told you that you were risking maybe $0.20 max to make double that.
This would have been hard to make it a profitable trade.
And it’s likely that you would have been chopped up and got stopped out for a loss.
But that doesn’t mean you stop for the day.
You want to be an active participant in this kind of action after earnings reports.
If you were stopped out of your initial position, and the stock is ripping higher, get in on that action!
If you made a mistake thinking it was a short, then cover your position and get on the winning side of the trade the other way.
You risked $0.20 on the first trade. Do the same on the second one.
If you bought DKNG at the VWAP $20.05 got you all the way passed $21.00 before it eventually rolled over again.
You want to have it so you can make several wrong trades in a row before the one that works makes it profitable for you.
Monday, markets are closed for President’s Day, so we need to make a game plan for Tuesday.
Here’s what I want you to do for Tuesday…
Go find an earnings calendar, choose one company you want to follow, and trade that name on that day.
The morning before at 8:00 am ET, the company will report earnings. The stock will go crazy, and that will define your levels that you want to target.
Draw your red lines, follow the stock, and trade it with your risk defined.
You need to not be afraid of taking risk-defined losses, and you need to take your profits.
I’ll see you all Tuesday. Enjoy your long weekend!
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5 responses to “The One Trade That You Need to Add to Your Arsenal”
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February 17 2023
Kenny, Can you give us the name of a few companies that have in the past had big swings in their stock price after reporting earnings?
There’s a lot…often times several in one day! Most recently Kenny traded DASH and DKNG. Be sure to check out the top of ThisIsVWAP.com every day for a list of names that Kenny is watching!
Kenny, I have been out of the trades for a while now. I have been busy with my daughter in ICU unit since before Xmas. So I am going to try and make some money for the transplants she has to have to live. I am not sure what company or how to find it but I’ll try to follow your advice and do something. Thanks
What is VWAP?
VWAP is Volume Weighted Average Price – the EKG, or heartbeat of the market. Under the “Get Started” menu at the top of this page, you can find several helpful guides that will set you on the path of becoming a true VWAPian