As I suggested last week, earnings has got off to a quiet but overall positive start.
A couple of stocks not in today’s review but worth keeping an eye on are GS and MS, but the financial sector is by no means clustering uniformly.
Remember, while our method involves playing OVI breakouts from flag patterns you can niche this technique even further by focusing on where the ‘Big Money Keys’ are.
- A persistent OVI, revealing the hidden money under the hood.
- Big Money … big volume in the appropriate direction.
- A big move in the direction of the main trend, showing that the big volume has been aggressive in its nature.
- A recent breach of a key level (we like the 200-dma) as professionals and amateurs alike keep an eye on this.
From here you focus on whether there is a low-risk entry point:
- Price consolidation (a flag type pattern)
- Volume consolidation during the price consolidation … ie volume now dropping off, signalling the absence of adverse trading activity. Even a small amount of constructive activity will push your stock into profit.
And from here, our trading plan takes over:
- Entry … at a safe level and have stop loss
- Defend … protect your profits
- Grow … retain part of your position in the event of a trend manifesting
- Evidence … always use the OVI as this will increase your batting averages.
Within this framework there are a couple of extras that can be very helpful in increasing our odds, but this is the framework you can use for as long as you like.
Aside from being an awesome way to trade (in both directions), it is remarkably simple, enabling you to specialize and hone your skills by way of repetition.
Today’s OVI Market focuses mainly on these setups. Remember, because we are in earnings right now, we are being slightly cautious given the news-driven nature of the markets over the past few months.
If you add up the typical amount of dollar movement over all stocks in the 4-days around each earnings, the number is around $1.5 trillion, with the average move being around 16.72%!
However, if you then measure the cumulative figure for the two-months following earnings the amount of dollar movement DOUBLES to $3 Trillion, with the average move being over 35%!
That means the post-earnings period is incredibly lucrative AND it’s happening after the potential surprise of earnings, meaning it’s a safer time to trade a stock.
Today’s review contains stocks that are mainly doing what we want them to do. Look out for those ‘Big Money Keys’ and remember to stick to the most obvious setups.