How To Score Huge Gains From Powerful Earnings Gap Ups

Many traders avoid buying stocks that have gapped sharply higher, but buying gaps can lead to massive gains–if you select stocks with the right criteria. Here’s our step-by-step guide for buying explosive earnings gaps for huge gains.

Buying a large gap up is scary for many traders, as the stock often appears to be too extended on the daily chart.

However, we have learned through the years that it’s a major buy signal when a stock gaps higher in reaction to an earnings report with the price and volume action extremely strong.

Some of these stocks are up as much as 15-30% above the prior day’s close before we even begin to buy–yet these stocks often go on to be our biggest winners.

Some gaps should definitely be avoided

Not all gaps are buyable

We only buy gap ups in stocks that have strong quarterly earnings or sales growth (+20% or more) and are extremely liquid.

The gap should also occur while the stock is in a solid base, or has at least just broken out from a base one to two weeks prior.

This is important to note, as we are not looking to buy a gap up in the middle of a strong, existing uptrend.

If you are able to trade the market open, then buying the gap up on a move above the opening 1-minute or 5-minute high is the best entry.

However, since the Morpheus trading system is designed to be the perfect side hustle for part-time traders who cannot watch the market all day, continue reading to learn about reliable, alternative entry points other than buying on the gap up day.

Trading the Snapchat earnings gap [SNAP]

Popular social media stock Snapchat [SNAP] gapped higher after reporting earnings on October 21, closing with a +28% gain on 10x average volume that day.

The gap had everything we look for: a large percentage gain, monster volume, and a gap up to new highs.

SNAP also has impressive earnings growth, with high liquidity.

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Disclaimer: Past results are not necessarily indicative of future results. There is a high degree of risk for substantial losses in trading securities. All data and material on this website ...

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