Earnings Trading Strategy: Hot Theme Setup — Full Breakdown & Transcript

[00:02] out of the session. That was not what I expected. Tim and I started talking [music] on and it turned into him basically leaking an entire amendment to our core playbook. I'm not kidding. He goes deep on how to catch these monster

[00:16] in the hot themes without ever needing to touch a fundamental spreadsheet. I managed to get him to map out the exact mechanics, the setups. And one thing to hunt for in this [music] conversation is Tim reveals how to use

[00:30] theme to gain massive conviction. It's like having a leading indicator for the biggest moves of the quarter. We didn't plan on giving this much leeway, but the tape was rolling. Episode 14, the

[00:45] [music] Trading Floor Podcast. Let's go. All right, Tim, so you've been nailing down a pretty powerful process for these earnings plays. And I mean, it helped us catch Fastly, frankly. Um you've been

[00:59] simplifying this play over and over and over, and I've been loving how you've been outlining this thing. And today I want to talk about essentially the amendment that you've created.

[01:12] Because we were talking earlier today, and I noticed that you added a bunch of stuff to our playbook. Right? This This AAOI trade, which we all know like ran pretty hard. There was an elaborate breakdown of this

[01:24] playbook and had a bunch of stuff. Like not only AAOI, but CEUR and LITE and comparing it to all the other names in that similar theme. And basically, it

[01:36] sounded like what you were saying with this playbook is we've had three iterations of this particular earnings strategy that we've been going off so far, but now I have a fourth.

[01:49] today because I think this is a A, a great example of of how we're always evolving these plays and kind of adding to them. this was super relevant because I could see why this needs to be a fourth play.

[02:05] So I want to start by asking you what's are we talking about, and what are the three iterations that we've been trading for a while now? Yeah, so we're talking about the

[02:20] earnings catalyst play. So looking at earnings reports and looking for the swing trade starting on day one. And right now, we have the three before this amendment was the types of categories of earnings reports to put

[02:35] them into buckets. We had a first clean profitable beat. We had the acceleration {slash} inflection quarter. And then the third one was a strong company continuing to crush it quarter.

[02:48] So the first clean profitable beat, that's when a stock just becomes profitable. So the big importance there is that it's the first real solid report

[03:00] that tells the street and investors that this business model is working. They're revenue. Then you have the acceleration episodic pivot. This is your Qualmaggie setup. And this is when you see huge

[03:16] acceleration in EPS growth, revenue growth. Uh and it tends to be a major importance there is you get the first clean profitable beat quarter always before you get uh acceleration inflection quarter. And that now tells

[03:31] you that that first clean profitable beat wasn't just a one-off fluke quarter. And they're able to sustain. Now you're seeing so much more revenue visibility into the future. And then the third one was just a strong

[03:46] company continuing to crush it. Where you had your inflection quarter, you're seeing the acceleration. And this is going to be crazy good numbers. Like the Probably going to be bigger percent beats. Maybe even like guidance raised

[04:02] more. But the revenue growth in the EPS growth isn't going to have as big of a rate of change from the previous quarter as you had in the inflection quarter. But it's going to be really good numbers on a stock that's already inflected

[04:17] fundamentally. Do you want to sit in on all of our daily and weekly in-house trader meetings? There's no bigger edge retail traders can get. Visit smbtradingfloor.com to learn more. Just to break these down

[04:30] something that I had to learn when you were essentially teaching us this playbook. Right? I mean, we we'd been trading going off of more of what I call like a choose your

[04:43] reading the report and you're just trying to decide whether it was great or Yeah. Right? Okay. >> And that's that's fine. Sometimes you love about what you're doing is you're categorizing these different types of

[04:58] earnings plays into buckets. So it's much easier to process mentally cuz there's so much information out there that we kind of need this type of organization, in my opinion, to be consistent. Right? That's

[05:12] the jobs. Oh, yeah. At least in terms of designing these strategies. So the first clean profitable beat. That happens from from my understanding of watching these,

[05:26] that can create a really great day one reaction, especially on names with like complete surprise. Like we're always looking, as you say, for something that the market was not expecting. But this is not, as you point out,

[05:43] the big inflection quarter. Because this is just the first time that it proves Exactly. >> not necessarily sustained profitability. It's just, okay, now we're profitable. Now we beat earnings.

[05:56] We probably accelerated. And this is really the point I want to get to. We probably had some really big acceleration quarters to get there. But accelerating from negative or accelerating from nothing is a big

[06:10] difference than accelerating from being already is like let's get that first clean profitable beat first, and then let's see that huge pickup in revenue growth.

[06:26] And that is your major inflection quarter. To this point, that's been our bread and butter play. And that's that was Fastly, right? As we did a whole podcast about. And then later on, and this is this is often the trick,

[06:43] is we get that continued crushing it quarter. What did you call it? The Strong company continuing to crush it. Exactly. crushing. Still crushing quarter. Still crushing quarter, where you're just

[06:55] going to see huge numbers, probably a huge beat, but the cat's out of the bag. It's not as much of a surprise anymore. A lot of this was priced in on the big inflection acceleration quarter. So what I've noticed is sometimes we get these

[07:09] big gap ups that sell off on those days. Not all the time. Not all the time. But I remember Reddit doing this. Right? Like after these big runs, you see these like, oh my gosh, like this is the one of the biggest beats I've ever seen.

[07:25] selling off? So this is why I think this framework is so brilliant because it removes all of that um because it's so organized, it removes all of that like, why is this selling off? Like why is this inflecting? Why is it because

[07:40] you're really telling a story by breaking it into these buckets. So Exactly. And like just to chime in, that's the whole point where like when I first started, I would look at earnings reports very much report by report. And

[07:56] you're just looking at that single report in a vacuum. And that's not how the like street analyzes these stocks. And like the whole idea is we're really trying to gauge when the street's going to re-rate this stock because of X, Y,

[08:09] and Z. And if you're looking at just each report alone, you have no idea of have been telling. And just to also add, like when a

[08:21] stock's unprofitable, you're going to see insane growth numbers. Like before, they're going to be so massive, but it's like we don't they're profitable.

[08:33] Okay. And and and also just to not to sidetrack too much, but this earnings catalyst component of the of this earnings trade that we make, where we're buying day one, we're swinging for a couple weeks, sometimes a couple

[08:48] months. Um or we're just trading it on day one because it's a super explosive capitalize on these types of opportunities. The catalyst is a huge check in favor for this play, but it's not the only

[09:03] one, right? So just really quickly, not to get too sidetracked cuz we're really going to focus on the variable that is the catalyst here today, but what are these plays in order to grade them, in order to actually consider one of these

[09:16] like a big opportunity? Yeah, the catalyst is going to have the most weight. But we're worried about and we're like looking at theme. That's another check in favor. We're looking at the volume that they do overnight on the

[09:29] release. We're looking at the higher time frame technicals. Is this breaking out in blue sky territory, or is it running into overhead resistance? Is it actually a breakout? We're looking at the overnight price

[09:44] We're looking at the overnight price action. Is the after hours range holding the initial reaction? Is the premarket range holding up as well? And that's all the stuff like before the open. And like that's great, like all

[09:56] good and dandy, but then you need to see stuff run that market actually opens. So we want to then see the volume like come in in a big way, like massive volume bars off the open like, you know, two plus standard deviations. We want to see

[10:10] the market tell us we're right once the market opens. And how do how are we screening for these plays because I one thing that always crushed me like when we started getting into these we we did like so much quant work. I mean this

[10:24] was by hand. 20 2022 now we're using cloud code and it seems like so far away from when we had all Google sheets open and and color coding things by hand. Oh my god, I can't

[10:38] believe we did that. >> insane. Um but we were breaking down all these past examples and looking at the earnings, looking at the higher time frames, the moving moving averages, like everything. And

[10:51] we one of the things that I struggled with after doing all this work is we know generally which ones are going to trend. Like we did a lot of good work like where are targets, where are stops.

[11:06] Tons of great work. But then earning season would come >> there'd be like 80 names reporting in the morning and I'd be like, okay, I >> look at all of them, yeah. >> Yeah, like what do you like so you know,

[11:19] you can look at what's gapping up or you know, maybe just look at the interesting names. Like that's kind of like tech names that I knew so I'm going to

[11:32] look into those reports, but then some random name would like run hard and then my gosh, they they destroyed earnings. Like how did I miss this? So like how how are you screening for these

[11:46] and how are you deciding which reports to actually look at in the morning? Yeah, I'd say there's probably like three different ways that I screen. So one would be looking at the percent A vol. So looking at the volume that a

[12:00] stock does in the overnight session in comparison to the percent A vol and we're looking for the biggest because that's the most significant reports. So that's one. I would say the second would be looking

[12:14] at like the ATR gap or looking at what it's doing the percent gap versus the implied. So more of the magnitude of the gap. And then the third would be like hot themes and like good themes. You want to keep track about when those

[12:29] stocks are reporting. So like a memory, you know, name. You should know when MU had their earnings recently. And like you want to always be checking those themes. And I would say that's probably the main three ways.

[12:41] >> Okay. And so And today we're going to talk about fiber optics and photonics names which AAOI was like the big example and I know this because I was to our team playbook and I mean I just noticed that

[12:55] this thing appeared in our notion and I was like, okay, what did Tim do? So I it was like pages long. Master class. Yes, I was like, okay, hold on a second. Like what did you do here? And I realized that you

[13:09] added like another like a whole other bucket for a type of earnings report that this did and it made a lot of sense to me because even we went back to some of the comments that I made that day

[13:23] like in our chat and they were very much in line with with this particular um direction that you were going in. So what what what are you adding to these three? So we have the first clean profitable beat, we have

[13:37] the major acceleration growth inflection quarter and then we have the this company's crushing it. What's the fourth one? Would you like to gain the biggest edge a retail trader can get? All of our daily and weekly

[13:51] in-house trader meetings are now available to you. Just head over to smbtrainingfloor.com to find out more. So the fourth one is a hot theme getting rewarded. That's how I'm calling it, but it's a hot theme in

[14:06] the market getting rewarded. So that's where you have a leading theme like fiber optics and you notice that the early reporters, so the stocks within the theme that report early in a quarter

[14:20] the street is rewarding them and they're getting great follow through after their day one and then later in that quarter you get a stock in that same theme put up a really strong report, really strong numbers. It doesn't necessarily have to

[14:35] be acceleration inflection numbers or fastly like numbers. But we have so much information that the street is rewarding these reports. And then you get another strong one. So what I love with this is like the first three are very

[14:50] idiosyncratic. Like they're very much stock like specific to do with that story um for that specific stock. And the theme is like a good check in favor,

[15:02] but it's not like you wouldn't take one of these huge inflection quarters necessarily if it wasn't in fiber optics like a fastly with edge computing. This fourth one's all about the theme. And it was a missing piece because like

[15:16] in AAOI you're looking at the numbers and we'll get into them more and really dissect all of this theme and all the reports. But like they arguably weren't good enough to be like the best acceleration. It wasn't acceleration in

[15:31] the report, but it doesn't scream at you. But what does scream at you is like this like every single fiber optics report followed through. Even the ones just like they went higher, it's like they made massive moves. And then like

[15:48] it was basically three weeks after you had LITE, COHR, then you have AAOI and about this and like the point is like trying to like do the work to make it simple, but it's simple like because you get the information early on those early

[16:05] reporters and then you're getting another report later in the quarter information than like if you were looking at AAOI again in a vacuum and the theme. Yeah, it's like it's like theme on theme action. Yeah, yeah, it's

[16:21] all theme. It's a theme on top of a theme because you got you have a theme in photonics and fiber optics and then the the earnings quarter theme is that these names are running. Right? And we're always trying to we're

[16:34] always trying to find patterns of these earning seasons, right? Because I mean even with our automated models that trade earnings like is this going to be the kind of earning season where strong reports run

[16:49] or gap ups get sold or everything gaps down and gets bought or they're just certain name, you know, there's there's always like a like a vibe to each earning season and and you can't really every earning season has a has a vibe of

[17:05] its own and you you can't really give like a blanket. Some sometimes a name will stand out so much that it just transcends all that, but typically there are patterns to these earning seasons. So this is like a major pattern

[17:19] that we can identify. So let's let's dive into this. What do you got for us? these. Yeah, I I'm going to share my screen. I feel like that's going to be the best way to go about this. So basically just even

[17:31] mention like fiber optics leading theme this year, like the quick read through with this is, you know, more AI demand, more data centers is like more bandwidth and like the old way of like doing it was like copper cables and now

[17:48] with like such high demand and such like just massive bandwidth, more GPUs, that wasn't good enough and then you need these fiber optic companies. Yeah. There again like the second, third derivative of AI. I I like you know I love themes,

[18:04] right? And and putting these theme lists together and I'm I'm actually planning on further further organizing our notion because I think some of the themes can be better in terms of the the whole

[18:17] evolving thing because the market's always changing and some of these themes are more important during certain times and you got to editing it. But the way that I categorize fiber optics and photonics is I put them

[18:32] in the picks and shovel category of of this whole AI layer, right? So they they're kind of in the semiconductor bucket even though they're not tech technically semiconductors. They're you know, the data center

[18:48] infrastructure is there. Right? All the strategic resources are feeding into building these semiconductors and fiber optics and things. They're they're little um little chips and little enablers that

[19:04] little chips and little enablers that that become part of the technology used in these data centers and in the in the processors. And then from the data now we're emitting the information and that that goes out into the actual

[19:17] that that goes out into the actual devices into the the real the frontier tech, right? The robots and the devices and the AI um software and all that kind of stuff. So that's where I put fiber optics and you

[19:29] don't even really need to know what they are. But I think it helps to know where they fit in in this entire ecosystem because there are moments where they're just selling off all the picks and shovels or they're buying all

[19:44] off all the the data center um the actual like data center Right? Like Enphase and Corning Right? Like Enphase and Corning and Iron and Cypher. Um or they might be

[19:59] like they sold they sold software off heart, right? So, that's kind of where I put AAOI. And all I really know about these things cuz I'm not I'm not that smart is that it helps transmit the signals

[20:12] between the different nodes within the data centers within these processors and the computers through like fiber optics and photonics. That's that's pretty much the the extent of my knowledge. Exactly. And we're no like experts in

[20:26] this field at all. But we're tracking them. You need to know you said. And even funny too. I I forgot when I said I said very in-depth masterclass all fiber optics audix. I was feeling

[20:40] Yeah, that's what caught my eye. I was like, okay, I'm in for something when I going to keep reading. Here's a mind-bending stat for you. SMB Here's a mind-bending stat for you. SMB traders have 20x to 40x higher odds of

[20:54] success than independent traders. Find out why and how to greatly increase smbtradingfloor.com. So, this is what we're talking about here where this big green candle was AAOI's day one. So, they reported after

[21:12] hours February 26th. This is day one, the 27th. And just an insane move where the 27th. And just an insane move where it was like

[21:25] pretty much opened I can't exactly see, but like low 60s and then made a move to almost like 115. I think it ended up getting to 117 in the pre-market of this Where they all play out kind of differently and like I remember just

[21:39] looking at this AAOI and being like, oh my god, like what an incredible two-day my god, like what an incredible two-day move. Like how could we have been more prepared for this earnings report to be able to catch it?

[21:51] And then I was like, all right. So, like let's start looking at this theme. And when did the other stocks in this theme report? and we already kind of went over this, but very simple. Like it's all about

[22:06] theme and first thing was like, all right. What are the main stocks in this theme? And this is stuff where we have our theme lists on notion. You know, it's great. Makes it super easy. And it's LITE,

[22:20] COHR, AAOI and CIEN. And there are more, but these were like the major players that I was focused on. And in order we had LITE reported first. COHR, AAOI, then CIEN.

[22:37] we don't need to get too much in the weeds on the catalyst. I mean, we can if you want. It's up to you. Well, what what's the general idea? Like cuz when I was reading through this

[22:50] and maybe I can just ask you questions about it. But each report actually fell already outlined. Yes. >> And had a different kind of reaction. So, just to cut to the chase um what are we looking at right now?

[23:04] um what are we looking at right now? LITE? So, LITE was an inflection acceleration quarter. Like this is a report that would fall in that bucket report that would fall in that bucket that you can take separately as well.

[23:17] So, this was a really strong report. Really strong report. Guidance was huge. Um that was like one of the biggest surprise factors. You can kind of see surprise factors. You can kind of see some of this is my comment work with AI.

[23:32] this was their day one. So this is an example too. You know, you have this idea of the report being super good. Price action needs to confirm it. It sprays up in pre-market then pulls

[23:46] into the open. Can't get above the pre-market high off the open and then It's a messy intraday trader too. It's not the cleanest stock. Which I want to come back to a little bit because there's a question around

[23:58] this that I want to ask later. So, hold that thought. So, hold that thought. >> So, I'm and by no means like, oh why great on day one and that's a big part of our earnings catalyst play criteria.

[24:13] But what you end up seeing is day one is this where I circled this indecisive candle. Day two it gets bought super hard.

[24:26] Day three it's bought. Day four and then you can kind of see it continues to trend up until this second circle, which is when AAOI reported. So I wasn't in this trade, but this is such

[24:39] good information where it's like, all right. Like it followed through on their earnings. On a really good acceleration quarter LITE followed through. So, it's like, all right. Put that to the side. Jot it down. Interesting.

[24:58] So, this one good report. Wasn't an acceleration quarter by any means. And it was a worse quarter than LITE. And you'll see the dynamics within a theme. Like if you report right after

[25:12] another competitor uh and it's not as good of a report, sometimes the street will punish that. And that's what we saw here. Where like initial gap down reversed, but then sells off into the

[25:26] open. And again, look at that after hours. Like that's messy. I'm not looking for a trade there, you know? Like I don't I don't care. But

[25:40] Here's day one. Also, actually let me make let me make a point, too. Also, you know how my brain works. So, Also, you know how my brain works. So, if I get too jumpy, let me know.

[25:54] it gapped down decently big. And right off the open it gets immediately bought. And what's cool about this play is like again, it's all about the theme. And you start to see nuances as well about how these

[26:09] stocks trade on day one. And like now I'm starting to get this idea of like, all right. It's kind of interesting how this got bought crazy hard and then it also just didn't do anything. Like the phase of momentum day one was literally

[26:22] the opening drive. And then it kind of just grinded higher and it closed at highs. So, again back your mind, you're learning about how these themes trade. But it got bought gapped down got bought really hard.

[26:34] And again, maybe you take that trade. Doesn't matter. they've rewarded this. This is day one. This is AAOI's earnings. Or even when it's not an inflection quarter. And from

[26:47] reading your um playbook today I kind of learned that this is like a bigger company that um might move a little slower. It's more established. It's more diversified. Might be not quite as the pure play that

[27:00] like LITE is. So, not only was LITE more of a pure play it had um more like an actual inflection quarter. COHR was a little bit more like yeah, we're killing it. We're we're

[27:13] we're we're proving the theme correct. But there's might there might not be quite as much alpha in this particular name for good reasons because it's didn't have an inflection quarter. But the read through was certainly not bad

[27:27] not bad for the theme whatsoever, which is your point. And the reaction was good which is really the key that you're tracking. And Tim, I want to highlight like what I said and I I sent this to you today because I remember saying this

[27:42] and this was in our chat and and my comment today was like, yeah, I was too late. Right? So, the work you're doing is helping me and us not be too late with a comment like this. Because when we were seeing

[27:56] AAOI run midday and none of us were in it earnings plays, but this was one that we did not catch. I put in the chat a long monthly chart. I don't know which one it is. Of AAOI showing that it's breaking

[28:12] like a huge base. So, the technicals were there. And I said um that green line base back to 2017 monthly chart. Broke out on earnings

[28:28] Fiber optics photonics. And then I said almost every single one of these ran on earnings this quarter and I gave a list, which was GLW which was GLW LITE, COHR, AEIS VIAV, AXTI, IPGP. And

[28:45] then I said CIEN has earnings coming up. So, there were even more of these names that ran after earnings. Since the playbook. Yeah, there was a bunch. And here's that

[28:58] weekly that you're talking about as well just to show. Yeah, it's absurd. Um so, Yeah. Which I mean, didn't like it's great to

[29:10] kind of highlight that cuz it gets us thinking about this kind of stuff, but it would have been even better to write that in the pre-market. And that's what we're trying like that's always what we're trying to get better at with

[29:23] like these kinds of things because noticing something like that midday and putting it all together um versus in the pre-market can can really be the the difference between like a great month and like a normal month. Oh, yeah.

[29:38] Like >> Yeah. Yeah. And it's great. Like what I like about this fourth category is the whole earnings plays is like you really are trying to think like the street thinks

[29:54] and like big institutions where you're looking at surprise factor, what the street expect, what we get and then does this cause the street to re-rate the stock? And in this category they're re-rating fiber optics as a

[30:09] theme, the entire basket. So that's what this getting rewarded like really means. this getting rewarded like really means. Okay, so we noticed that fiber optic stocks are running on earnings. We look into those earnings and we realize that

[30:23] they're not all the same, but they're all good. They're all beating, right? Like we we saw an inflection in LITE, we saw like continuing to do well in COHR, but regardless of category of earnings that these are

[30:39] they're all running after earnings. So if we've established that, we've established the theme. And the work is done at least in terms of showing the potential of this AOI play because now we know that this could fall

[30:54] into that fourth bucket, right? So let's talk about AOI because I thought that there were some interesting things about that report that might have highlighted the the alpha that you might get on

[31:07] something like this. Like why would why did this run even more aggressively than those others and like I I have some thoughts on that, but I want to I want to hear your thoughts. Yeah. So yeah, AOI, this is our trade like, you know,

[31:20] this is where we want to be salivating like salivating right before this. Um but you can see they beat, um still slightly negative. Where the main like inflection happened was really with their margins. Um it was a record

[31:33] revenue quarter also for them. And they're just about to turn profitable. So we're going back to it's like, all right, they haven't had their first clean profitable beat yet. But

[31:46] they had an inflection in their margins in their gross margins. And record revenue. Near profitability, you can almost like yeah, they're definitely going to be turning profitable next quarter. So like

[32:00] it doesn't technically fall into any of our buckets. But this is like a less CAOHR. Um you know, smaller market cap Um you know, smaller market cap and that is some factors that led to

[32:15] this like explosive move. What I think was interesting too is like Like again, it had it didn't have like your classic acceleration in revenue growth, but it's also still not profitable.

[32:30] Right. I mean, what did what did it not meet the acceleration quarter only because it wasn't profitable yet? Like would it have because it still accelerated, right? >> It did still accelerate, yeah. It just

[32:42] they just weren't profitable yet, which which technically doesn't fall into that look for. But it's that classic case of like you're going to see some big acceleration in those early stages

[32:57] So it's that kind of thing. Like we mentioned that earlier, right? Where you it's it's kind of a big jump. But now this is where we make an exception. This is what I love about it. Like the

[33:11] other way to look at this fourth bucket is okay, we have our first three buckets quarter. But where do we make an exception? Well, it's when it's in a hot theme that's running and they're rewarding all of them.

[33:26] And then when you layer on top of that the kind of stock that AOI is and I I think that this should not get lost on anybody. What like what the short interest is

[33:40] what? Like 13, 14%? Something like that. Yeah. Let me >> let me see. I think the float is less than 100 million. I think it's not like a low float, but it's like probably 60, 70 million.

[33:53] Um 15, 14 and a half short float. So this is a different company than like COHR or LITE. It's so different. So different. >> is Let's see. COHR has 174 million float.

[34:11] 4% short interest. Have you heard this study of tens of millions of traders which shows that only 1% of retail traders actually make Don't be a statistic. Visit

[34:24] smbtradingfloor.com to greatly increase your odds. Yeah, so this is going to be more like a leveraged fiber optics play, more of like an out like pure alpha volatile. The stock's just more

[34:40] as traders. So it has the potential to squeeze out like that. Especially with that with that short interest. Um and like you said, I thought, you know, just reading your report you know, I the thing one of the things

[34:53] that came to mind in terms of the catalyst was okay they're not profitable yet. But they accelerated so much and you these other things

[35:05] that you can now start to price in that first clean profitable beat. Like it's definitely happening next quarter. Like unless, you know, we go into some pivot in terms of the the you know, the AI trend or or you

[35:19] financial crisis or something. Like they should probably have that next quarter. So you start to price that in and you can see into the future a little bit and and the market's just already excited about these fiber optics. So

[35:34] what's the simple now that we have this bucket which makes total sense. What's the easiest what's the biggest ROI for capturing these trades? Is it

[35:48] is it like a top-down approach do you think? Like do you think that we should be just every single quarter probably create like an alert for this or some sort of like

[36:01] algo that that quantifies this, but do you think we should try to just figure out which themes are being rewarded the most and and quantify that tracking those themes so we we automatically know which names could

[36:15] fall into this fourth category? And what would be the other option Well, the other option would be finding names that crush it and then checking to see if their if theme if the theme is actually being rewarded.

[36:29] first one. Like and it depends. It's not going to always be fiber optics. Like I've noticed a ton in the past like this fourth category shows up a lot in retail where you get a first like three retail

[36:44] gap up and they follow through on earnings. And then like easy money trades and like great trades are when the fourth and fifth report. And like I notice that. But yeah, I think the easiest thing and the highest ROI would

[37:01] be every report knowing what theme it is and if yeah, honestly, we could definitely do something quant with this one reaction.

[37:13] You can get the like five day reaction. You can get just an ongoing like pretty much what the percent move is ATR move after their day one and then do it theme Yeah. I think that's

[37:27] Um cuz it's it's it's easy to miss it sounds obvious, but it's I find it easy to miss these things deliberate practices in your process because

[37:41] other stuff. It's not just these earnings plays. Like we're you know, we're trading the market and oil lately and some of this other crazy geopolitical stuff and there've been low floats going crazy

[37:55] lately. So And we became commodity traders this year. Exactly. It's yeah, we're few we're all futures traders now. yeah, it's it's really easy to miss something like this. Um even if you know

[38:08] what you're doing. And I think like that's for me like that's the key. Like that's the big the big lesson which is I I think why earnings plays because like I said, I'll just bring it back. Like

[38:22] I think the thing that I used to do incorrectly and I think it what it does is it overwhelms you as a trader is you take each earnings report on like individually in a world of its own. And you're just trying to answer the

[38:36] >> [laughter] >> And like it's so hard to sift through all that information and make and come to that decision because every company trades off of like different metrics and there's different

[38:50] situations. So breaking these up and simplifying them into buckets like really works for me and how my brain works. And I honestly think like the low-hanging fruit, like we talked a little about catalysts. But

[39:05] you go into next earnings quarter what I'm going to be doing is for all of the major leading themes, I'm going to create a table just like this that I'll look at every single day to know when they're reporting. And you know, like I

[39:17] they're reporting. And you know, like I recommend looking at the um reports in the catalyst, but at the same point like you don't need to be a fundamental analyst. Like you can just have these dates and then be like, all right what

[39:29] dates and then be like, all right what did LITE do day one? What did LITE do after day one? And then you just go stock by stock within each theme. And you can just be looking at the charts and be like, all right, yeah, followed

[39:41] through, rewarded. And then you go down right, that was the one right after, that's the second report, rewarded.

[39:55] is AAOI's report. This is their overnight session. Um I don't remember exactly what the percent A vol was, but it was doing significant percent A vol. And what's funny about this is >> What is what's significant? Like above

[40:09] 20? Above 50? Yeah, originally like would say 20. Like past. Like now above 50 is more of a good threshold, I would say. As we become more selective and you get an idea for how rare these

[40:24] reports are, too. So But what's funny is like we showed the LITE and the COHR and like they were super messy overnight sessions. Now this is like a juicy one for us.

[40:37] You get the first initial reaction on volume, holds up like well in after hours, then your pre-market range holds after hours support, gets bought right into the open. Like this is looking like Fastly. This is looking like really good

[40:52] day ones. It's a good pattern. When you just get that stair-step, like, you know, the trader that we we always that that Nick and I from. Um I'm not going to mention his name,

[41:05] 10-figure eight-figure trader. Um just trades these earnings plays and always talking about like higher highs, higher lows. Like after the report, into the pre-market, into the open, higher

[41:17] just keeps it so simple. Like that's what he wants to see. If he doesn't, then it's like a red flag. So Um these these names haven't always traded LITE, COHR, like all these fiber optics names. They don't They didn't always

[41:32] cleaner of a name. It's a name that's known to get more of a head of steam. >> More more of a momentum name, which is nice and it definitely showed that on this report. 100%. So then we go into the open

[41:49] and it gets bought into pre-market like on the imbalance there. And then immediately bought right off the open, massive volume. And this is similar reminds me of Fastly now. And the little tidbit, which I think's

[42:04] kind of a cool nuance, is like if you remember the COHR day one, like gap down, gets bought right off the open. You see this opening drive. point, you know, buy some above the pre-market high, volume confirms, buy

[42:20] some. Maybe even have a TEU app running. You can buy like the dips. of your head like, all right, this was a huge momentum move. Like huge opening drive. Like this might be the only real clean momentum phase of the day. And

[42:37] really, you know. It just kind of grinds, but closes at highs and like I terms of like a day one reaction. No, you can't. And and and the swing trade.

[42:49] fast. Like it almost doubled in the first two days. >> Literally, I mean, and usually this is rare. Like I When was the last time we saw this big of a gap, Garrett? Like Into day two on an earnings like

[43:03] Yeah. And and you know, some of that might be the the short short interest in shorts getting blown out. I don't know why you would be short this thing, to be honest, like within like a massive fiber optics like photonics bull market. Like

[43:19] I I don't know why you'd be short this thing. I you I don't care what you think of the company. Like the whole sector is like it's like the strongest sector in the market. I mean, I used to say like I mean, memory has been, but I

[43:31] I don't know why you'd be short this, but I guess you there are probably a lot less people short it now. I mean, one reason could be if you're not paying attention to how the other stocks in this theme reported and how

[43:44] Yeah. But that's why this like I honestly, I'm so pumped with this setup because like it's great. You have so much information from the early reporters in the theme. Yeah.

[43:57] So it's pretty Yeah, you go. Yeah, it's just it's pretty simple. It's like when you can break your rule on the other buckets. Like we're always looking for that classic inflection. And it works and it keeps you out of trouble when you

[44:10] don't get it. But then there are these times when it doesn't cleanly fall into that classic inflection quarter category. When do you break that rule? When the whole theme's being rewarded. And you know, I think

[44:23] to sum up this play right now, but I think you can layer on top of that. Okay. Um the whole theme's going. It did accelerate. It doesn't fit in only because it hasn't been profitable yet,

[44:37] It's got that lower float. It's been known to be a momentum name and that weekly monthly chart was breaking out of a massive base. So you've got all those other things going for it. The only thing you The only thing you didn't have

[44:51] thing you The only thing you didn't have going for it was some real like nuance that like didn't kind of let it get into our like inflection quarter bucket. our like inflection quarter bucket. Yes. Exactly. So I you know, it I think

[45:03] you know, you can you can make that exception, break your own rule. Which I mean, once you make a fourth bucket, you're not breaking a rule anymore. So And that's why this amendment was needed, in my opinion. And like we've

[45:16] seen this with space stocks as well. Um like now what I'm excited about is going back over the past like couple years. We have had so many themes and years. We have had so many themes and like seeing how this played out. Yeah.

[45:29] want to >> Basically, I I just wanted to show um on the daily. Okay. Where day one, huge gap into day You know, if we were in, we'd be crazy

[45:44] not to take off into that move. Oh, yeah. Um but it does end up holding, pulls in, gets bought near the 10 EMA, which got to love that. last one was CN. And if you're paying attention

[45:59] to how all the themes reported, you know, which one does this look like? Yeah, it looks like COHR. Yeah. Right? Yeah. Bigger bigger name, too. Right? Yeah. Bigger bigger name, too. Like kind of similar similar structure.

[46:14] Like kind of similar similar structure. Gaps down, gets bought, trends. Exactly. But uh yeah, I mean, I'm excited to keep diving into this, but the fourth category is hot theme getting rewarded.

[46:27] in. >> in. So All right, so great. I mean, playbooks as we as we make amendments and and modify these things and do more work. I kind of like that. Um So

[46:41] stay tuned. Everybody, thanks for joining in. We got We're on Spotify now. If you're on YouTube, check us on Spotify. And we'll be back next week. Till next time.

[46:53] Till next time. Good luck trading.