Fundamental Catalyst + Technical Entry

Entry Logic

• Long entry: A company reports blowout earnings, beating estimates and raising guidance. After the initial gap up, enter on a pullback to a key technical level like the 50% retracement of the gap or the rising 9 EMA on the 15-minute chart.
• Short entry: A company reports disastrous earnings, missing estimates and lowering guidance. After the initial gap down, enter on a rally to a key technical level.
• Confirmation: Extremely high volume, confirming institutional participation.
• Timeframe: 15-minute chart.
• Location: After a significant earnings gap.
• Market Condition: Earnings season.

Exit Logic

• Profit Target: A multi-day or multi-week swing trade. Target is open-ended.
• Scaling Out: Scale out 25% at 3R, 25% at 5R.
• Trailing Stop: Trail a stop below the 20-day moving average.
• Signal Failure: If the stock completely fills the earnings gap.
• Opposite Signal: Not applicable.
• Time Expiration: Hold as long as the trend remains intact.
• Momentum Loss: If the stock begins to underperform the market.

Stop Loss Structure

• Hard Stop: Below the low of the gap-day.
• Soft Stop: If the stock closes back inside the pre-earnings range.
• Max Dollar Loss: $500 per trade.
• Max Percent Loss: 2.5% of account.
• Structural Stop: The low of the gap-day is the ultimate stop.

Risk Management Framework

• Risk Per Trade: 2.5% of account.
• Daily Limit: Not applicable (swing trade).
• Weekly Limit: Not applicable.
• Max Drawdown: 15%.
• R:R Requirement: Minimum 3:1 on the first scale out.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: The wide stop requires a smaller position size.
• Conviction Sizing: Not recommended.
• Scaling In: Can add to the position on subsequent pullbacks.
• Scaling Out: Scale out at 3R and 5R.

Trade Filtering

• Market Conditions: Only during earnings season.
• Setups: A massive earnings surprise with a clear gap and high volume.
• Instruments: Growth stocks with high institutional ownership.
• Time Restrictions: The first few days after the earnings report.
• Chop/News Avoidance: The trade is based on the earnings news.

Context Framework

• Trend Direction: The earnings report creates a new trend.
• VWAP Relationship: Not a primary concern for the swing trade.
• MA Relationship: The 20-day and 50-day moving averages are key levels to watch.
• Range Location: A breakout from a multi-month range on earnings.
• Higher TF Alignment: The weekly chart should confirm the new trend.

Trade Management Rules

• Breakeven: Move stop to breakeven after the first scale out.
• Scale Out: At 3R and 5R.
• Add Size: On pullbacks to key moving averages.
• Fast vs Slow Moves: This is a position trade that may take weeks or months to play out.

Time Rules

• Optimal Window: The days following a major earnings report.
• Times to Avoid: The day of the report itself can be chaotic.
• Session Notes: A swing trading strategy, not a day trade.

Setup Classification

• A+ Setup: A huge earnings beat, massive gap up on 10x average volume, and a strong market.
• A Setup: A good earnings beat with a solid gap up.
• B Setup: A minor earnings beat or a mixed report.
• C Setup: An earnings miss.

Market Selection Criteria

• Instruments: High-growth stocks in leading sectors.
• Volume: Must have a massive increase in volume on the earnings day.
• Volatility: High volatility is expected.

Statistical Edge Metrics

• Win Rate: 60%.
• Avg Win: Very large (can be 10R or more).
• Avg Loss: 1R (where R is the initial stop).
• Profit Factor: Very high (> 4.0).
• Expectancy: Very high.

Failure Conditions

• Market Conditions: A bear market can mute the reaction to even good earnings.
• Specific Scenarios: The company provides cautious commentary on the conference call, causing the stock to reverse.

Psychological Rules

• Mental Discipline: Requires the patience to hold through pullbacks and the conviction to stay with the trend.

Advanced Components

• Regime Detection: The overall market environment (bull or bear) is a key factor.
• Filters: Focus on companies with a history of strong earnings growth.
• Correlation: Not a primary concern.
• MTF Alignment: The weekly and monthly charts should support a long-term move.

Location

• Strongest: A bull market during earnings season.
• Weakest: A bear market or a choppy, uncertain market.