Hey shoppers,
Yesterday in my free open house, I drew a pitchfork on SpaceX ahead of its earnings report.
This morning the stock gapped higher and opened right on the median line of that pitchfork, around $158. A couple of folks in chat told me they made money on it in both directions.
That’s the reason we spent today on trend lines and gaps.
Earnings almost always leave a gap on the chart, a stretch of prices where nothing traded between one day’s close and the next day’s open. Those earnings gaps tend to be the most reliable ones to trade off of, and a lot of the time they land on a pitchfork or trend line level.
The SpaceX straddle priced in about a $10.50 move. That’s where the median line sat, and that’s where the stock opened. It ran as high as $166 before the sellers took over and pushed it back down.
I repeat myself a lot in these sessions, and I’m going to do it again here: The close matters more than anything that happens during the day.
For example, Gold futures have pushed above $4,220 intraday over and over on the daily chart but haven’t closed above it. Until they do, I’m treating that level as resistance, no matter how bullish it looks at lunchtime.
Old support turns into new resistance once a stock breaks below it, and old resistance turns into new support once a stock breaks above it. So don’t erase a trend line just because the stock wandered off. And when a stock finally closes through a line it’s been fighting, it almost always comes back to visit that line on the next candle.
If you’re already in the trade, hang on.
After an earnings gap, I usually wait one to three days to see if the gap holds. The top and bottom of the gap become my new support and resistance. If the stock slides back into the gap, I don’t want to be long.
Waiting also helps me as an option buyer. SpaceX implied volatility went from 61 to 55 overnight, and it’ll keep coming down, so the calls get cheaper while I watch.
We’re going through the three candlesticks I lean on to spot a change in trend, then putting pitchforks, trend lines, and candles together on live charts. Meta jumped $41 right after its report while I was on air, then gave back almost half of it a few minutes later. Tesla barely budged. We’ll pull up both and see where they landed against the levels I drew.
I’ve also got Google on my watchlist because of one candle sitting at the bottom of its channel right now, and I’ll show you why.
It’s free. Tap this link to grab your seat
See you tomorrow!
Licia