Monday, 27 February 2012

Updated: Never Hold your stocks through Earnings when you are a Short Term Player!

A question from a friend:

"Thanks for your tip/sharing. I think many of us experienced that. But after gap up, at what price we should take the profit? It is really difficult."

My Comment:

Before Gap up:  
There are a few ways
1) Use resistance from previous high or low like Box Top or Bottom
2) Use technical indicators on your preference. Some like MA, Oscillators like RSI, or whatever your system like
3) Use time based system. Eg. Contra players never hold positions after contra period. Day traders never hold after Day close. Weekly Traders close on Friday.
Basically for Earnings play, it is a MUST you should exit b4 earnings day.
4) MY Favorite: Use price based support and resistance
which I called "Law of Gravity of Price" which I teach in my class. Sometimes even without looking at charts, I know the next support and resistance because there are prices that have the most volume which acts as support and resistances.

After Gap up:

Only 1 way, very Easy:
1) Get out immediately at the OPEN. No kidding. After a big gap up after earnings, immediately sell at the open because this stock needs a rest before running again. 95% chance this stock will rest.

5% are for those stocks that are having a lot of shorting. Shorters who are caught in the gap up need to cover positons and hence the stock continues to climb. In my course, I teach people how to screen out those stocks that are hugely shorted and will carry on up for days.

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