if company XYZ reports bowout earnings and guidence.how many of you buy the opening gap up in a stock? what are some of your strategies regarding such a scenario?
I suggest trying to bid for 1/4 to 1/2 position about 5 mins prior to open, then adding to the position on new highs at the open. That way you have a better average and can hold through any little swings. That would get you in stuff like ZMH and FTO today for a nice ride. I don't currently trade this but had some success with it last year.
There are 3 basic "gap plays".... gap-n-go, gap-n-crap, and gap-fill-resume... a couple variations of each. Sometimes you can make a better guess as to which it likely is. The rest of the time you need to figure it out as it develops. I find "indicators" to be of little value.
I don't like to go long a gap up on an earnings stock, but I do like stocks that gap above the previous days highs and find support there. You may be better off trading a stock in the same sector and using the earnings stock as a leader (if earnings stock is up 5%, and related stock is flat to up 1%, buy the related stock, especially if the related stock has not yet reported).
actually when stock 1) gaps up 2) forms a base and than 3) breaks out from the base (basic plan to print money).
I agree. remember "buy on rumor, sell on news." However we don't trade stocks on earnings day, way too risky. "Blow out earnings" - stock down 3 %, etc. Happens all the time. FWIW, Don