How to Scan for High-Probability Earnings Gap Breakout Candidates

Finding the best earnings gap breakout candidates is half the battle. This article provides a step-by-step guide on how to create a effective scan to identify high-probability setups.

Entry Rules

• Your scan should be the first step in your entry process. Once you have a list of candidates, you can then apply your other entry rules.

Exit Rules

• N/A

Profit Targets

• N/A

Stop Loss Placement

• N/A

Position Sizing

• N/A

Risk Management

• A good scan can help you avoid low-probability setups and improve your overall risk management.

Trade Management

• N/A

Psychology

• Having a systematic way to find trading opportunities can help you avoid the temptation to trade on a whim.

Creating Your Scan

• Platform: Use a effective scanning tool like Finviz, Trade-Ideas, or your broker's built-in scanner.
• Criteria:
  • Price: > $10
  • Average Volume (50-day): > 500,000
  • Gap Up %: > 15%
  • Volume Spike: Today's volume > 3x the 50-day average volume
  • Relative Strength (RS) Rating: > 80
• Timing: Run your scan after the market close to find stocks that gapped up that day.
• Refining Your List: Once you have your initial list of candidates, you can then manually review the charts to look for the best base formations.