Steve Spencer discusses how to enter follow through trades in the days following a powerful earnings move.

1. Steve Spencer
SMB Capital
August 16th 2012

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3.  Well rounded traders will have various
categories of trades by which they make
money. This is a bit different than a trading
“setup” per se. It is more broad. Many trading
setups can fit inside of a category.
 The reason we group trades into categories
as traders is to make sure that we have a
constant stream of good trading ideas

4.  Here are some examples of categories:
◦ Earnings follow up trades – trades we look to make
based on price action we observed after a stock
reported earnings.
◦ Market breakout trades – trades we look to make if
the market breaks out of a range.
◦ Market open trades - trades we look for during the
first 30 minutes of trading
◦ Options expiration trades - trades we look for
when options are set to expire

5.  Within each category you will have specific
setups you look to trade
◦ i.e. One of my favorite earnings follow up trades are
stocks that have held large gaps the first trading
day after reporting. These are great candidates for
follow through trades.

6.  Earnings follow up trades
◦ Stocks that gapped higher on very heavy volume
◦ Good long candidates in the week following the
earnings move
◦ What price action do we look for to enter on the
long side?
◦ How much risk should we take?
◦ When should we increase risk?
◦ When should we exit the trade if not working?
◦ How do we determine profit targets?