Comment by k1

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k1
November 25th, 2007 at 11:39 pm

SShhhhhh….on the Gap trading Method—:) -just make it easy and focus on only 4 patterns to recognize!!!
1)pop and pop
2)pop and pop failure
3)dip,pop and pop
4)dip, pop and pop failure
If it gaps down you have to reverse the thinking my young jedi. It reverses. For example FFIV was a reverse “dip, pop and pop failure”. It SHOULD have dropped of the last “pop”. Use 3min chart, japanese candlestick. You’ll see slight variations but the style holds true.

For awhile I was using a gap trading methodology of opening range breaks but this is better with price action movement recognition. This is simple and contains the important ingredient of self fulfilling prophecy. This is the prevailing methodology so you can bank on it.

I used to strangle and straddle earnings and biotech catalyst events all the time but it became very difficult after more people started to trade that way pushing premiums too high and made the those trades less profitable. Now I like to take advantage of that and trade after earnings and catalyst events like biotech taking advantage of the IV implosion that is more accentuated because of those same traders. You get a better value but your timing has too be more ON. Your price action recognition skills have to be much more refined. I’ve seen and had astronomical gains playing after the news and catalysts, its much easier to read the analyst reports, read all the data and technicals before making the trade and still get monster gains.
One of the best plays are a big beat on EPS, big beat on revs, upward guidance.