Episodic Pivot — Scan, Entry/Exit checklist, Situational Awareness summary.
The fundamental logic for an EP is news that catches the market off guard and forces a re-evaluation of the stock. Also called rocket fuel. Remember, when institutions buy, they don’t buy in one day. It can take many months for them to get to their desired allocation.
Note that Episodic Pivots sometimes also go by different names:
- Power Earnings Gap (PEG) by @traderstewie.
- Buyable Gap Ups by Gil Morales and Dr. Chris Kacher.
- Some other names that get tossed around are “post-earnings drift,” and “momentum gaps.”
You may notice slight differences in the conditions used to trade these depending on who you follow.
I’ve noticed that my daily workload becomes split into 3 parts, Scan, Entry/Exit, and Situational Awareness. I’ve comparmentalized the 3 below…
Scan checklist:
- Big move — According to EG and KK, the gap needs to be considerable: 8–10% or more. Not only that, but volume must be a multiple of the average daily volume, like 2x, 3x, 4x or more. Likewise, this volume needs to come in early (think pre-market or first 30 minutes).
- Volume +100k
- Orderly consolidation before explosive move. This is important, dont just jump into stocks that are doing good, the likelyhood that you’ll get spit back out or left bagholding is alot higher if there is no orderly consolidation before the big move.
- Catalyst — Things like: Earnings beat, FDA news, Media mention, Analyst upgrade, CEO change, New product, PR release, Twitter pump, Trump tweets, Sales numbers, Sector/Industry boost.
Helpful tools:
- The Stock Catalist, premarket movers : Here is an auto-updated list of the main premarket movers
- Finviz Screener, relative Volume over 2: Here I’ve set up a screener that looks for mid-cap or larger stocks trading at least 2x higher volume than normal.
Entry/Exit checklist:
Entry:
- Wait for the first 1-minute candle to form and observe the volume — Ideally, there is big volume right out of the gate, sometimes big volume comes a few minutes after the open on the smaller cap names. Note: KK rarely trades in extended hours but prefers to wait for the opening range highs, which means he will wait for the first 1-minute candle to form and closely observe the volume.
- If you bought the 1-minute highs, oftentimes you may add on the 5-minute highs also to get more confirmation and size.
- Often, you can miss the 1-minute opening range and instead buy the 5-minute highs or 60-minute highs. No need to be first in. You could just add through the day if the stock is acting well.
Exit(Stop/Take profit):
- Stop loss: always at the lows of the day.
- Make sure your stop is no more than 1x, or maximum 1.5x the average daily range or the average true range.
- Take profit: Sell 1/2 to 2/3 of your position 3–5 days after entry. Keep the rest in play.
- Trailing Stop: After taking profit, sell the rest of your position if stock closes below the 10 day Moving Average at day’s close. Note: Use 1-day candles then 10-candle moving average, NOT 10-day candles AND 10-candle moving avegrage.
SA — Situational Awareness: Industry, sector & general market performance
My favorite ways to get a read on the general market:
- Finviz S&P performance map.
- Stockbee’s Market Monitor, I can't believe he puts this out there for free. True legend this guy.
Are precious metals up today? If so, you might have better luck trading names in that sector or industry. Some ways to check on daily performance of specific Industries and Sectors:
- Finviz ETFs performance map
- https://www.tradingview.com/markets/stocks-usa/sectorandindustry-industry/
- https://www.bloomberg.com/markets/sectors
- https://eresearch.fidelity.com/eresearch/goto/markets_sectors/landing.jhtml
- https://www.yardeni.com/pub/peacockperf.pdf
- https://www.barchart.com/stocks/market-performance
- https://finviz.com/groups.ash
- https://novelinvestor.com/sector-performance/
About me:
I’m a novice retail trader, with a BA in fashion design(so you know you can really trust me when it comes to finance) in 2021 I joined a BootCamp where I had the opportunity to study under Pradeep Bonde aka Stockbee, EasyGuru or for short, EG. I’ve also followed the work of that degenerate mall cop Kristjan kullamägi, aka Qullamaggie or KK for short, for a few years.
There is nothing new in this post, this post is an attempt to consolidate and simplify the information that has been shared by both EG and KK for my own personal daily use and to potentially build an automated trading bot.
