Check out the morning action on these two gappers. Arista Networks (ANET) and Shake Shack (SHAK). (May 03, 2019)SHAK ANET GOOGL
We are going to look at a couple of stocks today that went different ways. I called a Snap Trading Session this morning, not Shack, a Snap Trading Session this morning, meaning let’s go make some money because there were some earnings moves that seemed pretty rich. I just want to go through a couple of them.
First of all, Shake Shack ( NYSE: SHAK ); great earnings, bullish comments on CNBC, which always brings in the retail traders. The stock bumps up here like 6 percent or so and then virtually immediately falls. The way you are trading this is, you have got to kind of anticipate this and say, “Okay, I wouldn’t feel comfortable buying the stock because I don’t want to be trading with all the retail lemmings that tend to buy high and sell low.” The stock is gapping out of this channel so you wait for the stock to open up, gyrate around for a minute or two, then sell the snot out of the stock and keep a buy stop just a little bit above that level and that makes you money.
On the other hand, Arista Networks ( NYSE: ANET ), you get the opposite way. You have the opposite move here, this fell down to the 200-day moving average, which was a very logical place for the stock to find support, to find buyers IF there were going to be buyers. And what I mean is, you see the 200-day moving average is at 260.00. Then when the stock gaps down you are looking at this level and you are saying, “Alright, are there buyers here?” And if the stock kept falling below 260.00, and it did for like about a half a cup of coffee, maybe a sip, that’s it just a couple of minutes. If it kept falling you are not just going to sit there like a fool and hold the stock waiting for buyers to discover that the stock is below $260.00. No, you would have to react and say, “Well, there are no buyers here so I don’t want to be one of them.” And so you would just hold off.
Once the stock finds it’s footing at 260.00 then you go ahead and buy the stock and then you can set a stop, in this case, it would be like 4 percent below this level. If you are day trading with some precision you can actually get away with a stop being at 1.5 or 2 percent. Then you are riding the stock, literally, all day long or at least for the first few hours of trading. This is one that, as far as the 59-minute trade kind of thing, the stock didn’t really get going until into the afternoon. So it was kind of a steady run all day long but never really threatened to get you shaken out. Once it ran above 260.00 it stayed there and never looked back.
These are just a couple of trades that we made. We looked at a lot of stuff these were two that worked. Around earnings time you can make trades like this more often than you think. If you just look for these extreme moves and then be prepared to take action when the extreme move snaps back the other way. Sometimes they don’t, Google ( NASDAQ: GOOG ) was one of those that the first day it fell and then it never really rebounded and sold off for a couple more days. Now finally, it looks like it is starting to get back on track; this would not be a day trade now, this would be a crap, I want my money back because I bought it at 1,200.00 and I am still under water. So this is a totally different trade here.