Hi Folks!
I just wanted to cover an effective day trading strategy that I use with my Power Earnings Gap strategy. I thought this would be a great time to give a refresher on this strategy since we're in the midst of earnings season and I'm sure there will be plenty of opportunity to put this strategy to use!
Each morning I share similar types of strategies and setups with Art of Trading private members in the morning tweet that I send out. I don't "alert" day trades because of the fast moving nature of these setups but many Art of Trading members take these setups as their own and trade them with confidence.
In this blog post we will break down one of those very setups (PEG R2G) and tweets that I made this past Friday (08-04-2023).
What is the PEG Red to Green (R2G) Strategy?
The PEG R2G strategy is meant for the day after the Power Earnings Gap event. What you want to see if the PEG stock open red and then quickly go green. Within the first 30 - 60 minutes of the trading day usually produces the best, most explosive results.
PEG stocks that have a SHORT INTEREST of 10% or higher will tend to be the BIGGEST and MOST aggressive movers on upside! So try to pay attention to Short Interest: I like to use ShortSqueeze.com or Finviz.com to find out a stock's short interest.
Ok, so how do I trade it?
I would like to share the tweet and setup from this past Friday (08-04-2023). We will break it down step by step and how you could have taken this setup for yourself! I personally took this setup.
Here was the morning tweet accompanied by the stock chart $EXTR:
In this particular $EXTR setup the high and tight inside day candle the day after (annotated on the chart) still made the PEG R2G a valid setup. If you get an inside day candle similar to this one after a Power Earnings Gap it gives a high probability PEG R2G setups the next day.
With inside day candles your risk parameters can be set slightly below the bottom price point of the inside day candle for setup failure and at the top price point for setup confirmation!
After tweeting this how did the setup develop and how did you trade it?
Here is an annotated step by step breakdown of the $EXTR trade. Follow along with the steps on the chart to understand the anatomy of the trade!
Step 1:
$EXTR opens red, gaps down slightly at the open following a nice strong "Power Earnings Gap" then followed by a high, tight ranged inside day candle the next day. (daily chart)
Step 2 | "RED to GREEN" or "R2G" trade:
The strategy is to take $EXTR long as soon as the stock goes green. So in this $EXTR case you want to go long around $29.70 area.
Step 3 | STOP LOSS:
The Stop loss would be set a few pennies below the opening lows. Somewhere around $29.45 - $29.40 would be ideal in this example
Step 4 | TARGETS:
Look for round numbers above. They tend to act as infliction points. In the case of this $EXTR example $31 - $32 would be attractive intraday price points for the stock to test. Look to book profits on strong moves such as these!
Keep this in mind, this strategy is purely a MOMENTUM play... so "BUYING HIGH and SELLING HIGHER" is the idea here as you're trying to catch a new momentum wave in a stock that's showing strong momentum after a big "shock event".
This is how I traded it with my entry and exit:
I took 4000 shares @ $30.07 as quickly as I could when the stock crossed over R2G.
My stop loss was $29.40 to give the trade plenty of room to work.
I sold 4000 shares @ $30.78 for aprox. $2800 profit, 47 minutes after the entry.
Keep in mind netting profit on trades like this is the important part. In and out, aggressive style momentum trading!
What are the next steps, how can I find these setups for myself?
EarningsWhispers on Twitter (X) breaks down the dates for earnings season for each upcoming company each week. This week you could add these names to your watchlists for potential post PEG R2G Setups:
$PLTR
$BABA
$RIVN
$UPST
$MARA
$TDD
$RBLX
$APPS
Then just wait for the earnings reports to come out. See if they make a PEG candle then wait until the next day after the PEG for a potential red open to try the PEG R2G setup on. Remember, just like with this $EXTR example if the stock makes a nice high and tight ranged inside day candle on the second day, the setup is still valid on the third day!
For addition Power Earnings Gap strategies as well as another PEG R2G trading example take a look at this educational blog post here: 3 Trading Strategies for Power Earnings Gaps!
For addition Day Trading strategies great for strong trending stocks take a look at this scalping strategy here: The Avalanche Day Trade!
I hope this step-by-step educational post will help you add another powerful tool to your trading arsenal! Thanks for taking the time to check it out!
Be sure to check out the Art of Trading Blog ( https://www.artoftrading.net/blog ) and all that it has to offer! I've created an extensive catalog of real world trading techniques, strategies and reviews such as this one! The free educational content can add a lot to your trading tool box and make you a more confident trader!