Earnings Gap Trading: Gap and Go vs. Crap — Full Breakdown & Transcript

[00:01] >> Energy. Okay. >> I am not I I've literally said energy is off my radar until the uh the end of the whole Iran not war. Because dude, it's like every time you turn around, it's up 5%, down 5%, and it's a very very

[00:17] difficult market to chew uh to trade. Uh but then you could look at something that's a lot smoother like Microsoft. Have you seen Microsoft after earnings? well. I know um uh Mike on the team has been trading this one has been pretty

[00:29] happy lately. But another another massive gap off these earnings of some very directional moves, yeah. >> But but to that point, those gaps can be brutal, right? Brutal both directions, right? Imagine that you were short.

[00:41] Imagine that you sold calls against against uh Microsoft at earnings. It's through that area at the top of that red candle right there, I could see a lot of definitely see some overhead resistance at this point where those uh those

[00:55] buyers who were trapped at that area, they're looking to get out as fast as they can, right? So, if Microsoft can push through that level right there, it definitely has some room to go up to another uh up to another area that could

[01:07] >> Well, that's a good point. I mean, up 2 and 1/2% on the day, you know, after gapping up, you know, from a low of 390 uh all the way to a high the next day at 450. So, I mean, that's 60 points in less than 24 hours. And it seemed like

[01:22] >> You know what I like about gaps? I call it a gap and go. And what we're looking at at Microsoft is a gap and go. Um and that's where a gaps up at least 5% and then it continues to push higher, right? A new regime has formed a uh a new uh a

[01:37] new buyer pool has come to town. And people are excited, right? That imbalance has shifted more towards the the greed. But anytime you see a gap like this, and then it closes below the low of that gap candle the next day, I

[01:49] call that a gap and crap. And it's a you know what? This is a fake out, get out where the top of that line is over there is a perfect example of a gap and crap, right? It gapped up, immediately turned around. That's not where you want to be.

[02:02] point. I can't tell from your from your chart right there, but it looks like it went down for several maybe three, four weeks at a time right there. you were referencing it was going to be June 1st and at the low of that move was

[02:16] So we've even been back there since over But it does seem like that momentum is continuing right into Microsoft to the point that you're making a little bit of that gap and go gap and go action.

[02:28] right? I I used to be scared of gaps. I used to be scared of all-time highs. it's like >> get a little more comfortable to to trade some of these? Was it a like screen time? Was it experience? What was

[02:41] >> It really was a little of both, right? It's I mean, I've been trading for 17 So I've definitely had some good years and I've had some bad years. But a lot of it is getting comfortable with these type of moves. And the more

[02:55] you know what? Gaps aren't scary if they continue on. And really it's it could be a great catalyst. In fact, if you look at Palantir a few quarters back was a great example. It had a gap and it didn't stop going for months.

[03:12] >> Palantir is not the big beautiful sexy stock that it was a few a few months It's funny. I keep my ear to the to the ground on on YouTube because I I I've made so many videos, but Palantir, SoFi, AMD, like there were

[03:28] several like real big stocks that people just couldn't get of them, it's not the case anymore. And you can see I think it's down roughly 30% give or take. I don't know exactly from its all-time highs. But yeah, right

[03:43] buying. I wouldn't even buy Aero with your money. That's how much I would not right now. >> No, of course not. look at SoFi. They just had earnings recently and uh another example of why I

[03:59] won't trade it. >> Yeah, it's been absolutely beaten down lately. Trading at about 1631 right now and just a few weeks ago we were trading at about uh 3275. So, I mean it's been pretty much cut it in half since that

[04:11] >> Absolutely. Errol, I want you to add three moving averages to your chart when you get a chance. I want you to use the 10 EMA, the 20 EMA, and the 50 EMA. template. When the 10 is over the 20 and price is over the 50, mathematically

[04:25] speaking, it is a bullish trend. Now, we don't know magnitude and we don't know you with mathematical certainty which direction you're going. And once that >> Will do that one more time for us. That's going to be the 10, the 50, and

[04:39] >> 10, 20, 50. There we go. >> When the 10 is over the 20 and price is over the 50, that mathematically is showing you the trend is up. Again, I can't tell you how long it'll trend that way, but it will show you by math, time

[04:51] direction. So, yeah, check that out, dude. Add that to your chart and you'll dude. Add that to your chart and you'll be really surprised by that.