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D2 continuation - Earnings beat - wedge - LW - 6-1-23.pptx

LW is a very strong stock with good earnings. After again a massive earnings beat, LW gapped up a lot. It closed strong and broke briefly above the all time high. On the 2nd day it opened above day 1 and made a strong continuation move into new all time highs.

D2 continuation - Earnings beat - wedge - LW - 6-1-23.pptx

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D2 continuation –
Earnings beat
Catalyst: Earnings beat
Setup: D2 continuation
Trades: Wedge pattern
Ticker: LW
Date: 6-1-2
Catalyst &
Fundamentals
Catalyst: Earnings beat. 60% EPS surprise which is a lot. Doing a
lot better than expected. On D1 there was strong elevated
volume. After a huge gap up, 5ATR, the price action was still
bullish where we held the opening range.
Setup: D2 continuation.
Float: 139 million.
Institutional Ownership: 91,5%.
Short %: 2,17%
ATR: 2,19
Average Daily volume (50 day): 1,6 million.
Daily volume: 3 million.
Gap%/Gap ATR: 1,8% / 0,8ATR
RVOL: ?
Key levels Trading at All Time High (ATH)
Support:
HOD1 and
ATH are 96,31
and 96,87.
TA Daily Chart: Prior Earnings
Analyzing prior earnings.
Even with large gap ups and strong surprise we can make solid moves. All d2’s
had some significant volume. Chronologically:
1)The 5ATR gap up was too strong extended even though we had a 50% positive
surprise. We closed red and made a huge move down. D2 was a reversal setup.
Perhaps some people wanted to buy the good earnings.
2)A 60% surprise led to a big gap up of 2.4atr. Still managed to make 2ATR
intraday. BUT the hourly shows that that move was made with the first 45-60
minutes of the day! Then it traded below VWAP on a big down move. It trended
without a lot of action and closed quite strong. On D2 we have a continuation
play where we make just over 1 ATR. Similar PA: holds HOD1 but major move is
done during the open. Not a trend day.
3)Smaller beat than last two earnings. Therefore, it doesn’t gap. During the
open the price action is everywhere. A big spike results. But we start to trend
higher and close near HOD. This was a HTF BO setup given a strong breakout
from the base.
This is what probably caused the strongest D2 of them all. We gap up a little big
and trend all day long. Great trade2hold.
4) Preceding price action is weaker than former earnings dates. Strong gap up
but not as extended on a strong beat again: 44% surprise. Weird intraday price
action again. Big spike and reclaim during open followed by a new LOD. Then we
reclaim and start to trend near the open high again, which was a 1.6 ATR move.
D2 gave a strong open but then turned into a failed continuation play.
Last Earnings
days
Beat/
miss Surprise
Gap
ATR
ATR
move
Most recent
earnings 0,23 44,2% 1,024 1,60
2nd last 0,14 27,5% -0,392 1,98
3rd last 0,29 65,9% 2,414 2,18
4th last 0,17 51,5% 5,295 3,53
D2
continuation
Earnings beat–
Trade Strategy
Stock selection
-Stock in play with a significant (technical) catalyst, earnings report or strong theme.
-Elevated RVOL above 3.
-Strong move from the open (0.75ATR move) OR exceptionally strong volume during open.
Trade2hold factors
- Holding above significant support level: HOD1 8/10 importance level and All Time High (ATH).
-Strong market, holding the lows in an uptrend.
-Strong catalyst: Earnings beat
-Very strong daily chart! Trending up for almost one year.
- Elevated RVOL. The volume on D2 wasn’t that great, but it’s often less than D1 and therefore of less
importance if it’s lower.
- Solid Wedge pattern
- Room to trend on the daily.
- Strong open through resistance (8/10), but not extended (+0.75 ATR) = Room to trend intraday.
Taking out support resistance levels on a D2 setup indicates the potential of a trend day.
Overall thought process – D2 continuation
We are at ATH’s, and we are quite extended. With the lack of volume coming in on D2 I shouldn’t expect a
2ATR trend day. I think it makes sense to sell a large proportion of shares at lower, prepared profit targets
instead of holding everything into the close.
Trend day
A stock with a good catalyst doesn’t always have to trend on D1. When on D2 we immediately take out
important resistance and we don’t even retest that level but consolidate higher. The optimal trade strategy
considering all the other factors is trade2hold. Anything else is a mistake.
I want to hold through PB’s
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D2 continuation - Earnings beat - wedge - LW - 6-1-23.pptx

  • 1. D2 continuation – Earnings beat Catalyst: Earnings beat Setup: D2 continuation Trades: Wedge pattern Ticker: LW Date: 6-1-2
  • 2. Catalyst & Fundamentals Catalyst: Earnings beat. 60% EPS surprise which is a lot. Doing a lot better than expected. On D1 there was strong elevated volume. After a huge gap up, 5ATR, the price action was still bullish where we held the opening range. Setup: D2 continuation. Float: 139 million. Institutional Ownership: 91,5%. Short %: 2,17% ATR: 2,19 Average Daily volume (50 day): 1,6 million. Daily volume: 3 million. Gap%/Gap ATR: 1,8% / 0,8ATR RVOL: ?
  • 3. Key levels Trading at All Time High (ATH) Support: HOD1 and ATH are 96,31 and 96,87.
  • 4. TA Daily Chart: Prior Earnings
  • 5. Analyzing prior earnings. Even with large gap ups and strong surprise we can make solid moves. All d2’s had some significant volume. Chronologically: 1)The 5ATR gap up was too strong extended even though we had a 50% positive surprise. We closed red and made a huge move down. D2 was a reversal setup. Perhaps some people wanted to buy the good earnings. 2)A 60% surprise led to a big gap up of 2.4atr. Still managed to make 2ATR intraday. BUT the hourly shows that that move was made with the first 45-60 minutes of the day! Then it traded below VWAP on a big down move. It trended without a lot of action and closed quite strong. On D2 we have a continuation play where we make just over 1 ATR. Similar PA: holds HOD1 but major move is done during the open. Not a trend day. 3)Smaller beat than last two earnings. Therefore, it doesn’t gap. During the open the price action is everywhere. A big spike results. But we start to trend higher and close near HOD. This was a HTF BO setup given a strong breakout from the base. This is what probably caused the strongest D2 of them all. We gap up a little big and trend all day long. Great trade2hold. 4) Preceding price action is weaker than former earnings dates. Strong gap up but not as extended on a strong beat again: 44% surprise. Weird intraday price action again. Big spike and reclaim during open followed by a new LOD. Then we reclaim and start to trend near the open high again, which was a 1.6 ATR move. D2 gave a strong open but then turned into a failed continuation play. Last Earnings days Beat/ miss Surprise Gap ATR ATR move Most recent earnings 0,23 44,2% 1,024 1,60 2nd last 0,14 27,5% -0,392 1,98 3rd last 0,29 65,9% 2,414 2,18 4th last 0,17 51,5% 5,295 3,53
  • 6. D2 continuation Earnings beat– Trade Strategy Stock selection -Stock in play with a significant (technical) catalyst, earnings report or strong theme. -Elevated RVOL above 3. -Strong move from the open (0.75ATR move) OR exceptionally strong volume during open. Trade2hold factors - Holding above significant support level: HOD1 8/10 importance level and All Time High (ATH). -Strong market, holding the lows in an uptrend. -Strong catalyst: Earnings beat -Very strong daily chart! Trending up for almost one year. - Elevated RVOL. The volume on D2 wasn’t that great, but it’s often less than D1 and therefore of less importance if it’s lower. - Solid Wedge pattern - Room to trend on the daily. - Strong open through resistance (8/10), but not extended (+0.75 ATR) = Room to trend intraday. Taking out support resistance levels on a D2 setup indicates the potential of a trend day. Overall thought process – D2 continuation We are at ATH’s, and we are quite extended. With the lack of volume coming in on D2 I shouldn’t expect a 2ATR trend day. I think it makes sense to sell a large proportion of shares at lower, prepared profit targets instead of holding everything into the close. Trend day A stock with a good catalyst doesn’t always have to trend on D1. When on D2 we immediately take out important resistance and we don’t even retest that level but consolidate higher. The optimal trade strategy considering all the other factors is trade2hold. Anything else is a mistake. I want to hold through PB’s
  • 7. Wedge Pattern Trade2hold – Trade Management Trade2hold - Flat Significant 5m close below 20 EMA: 1) close on above average selling volume; 2) a new 5m low that occurs after close; Goal: don’t sell more than 50% when going flat. Trade2hold – Exit strategy ATR moves: 1,25ATR, 1,5ATR Psychological level: 100 Wedge pattern- Entry Entry: First higher low Risk: consolidation low, otherwise pattern has failed. Add: When price starts to break out of tight pattern on volume. Risk: Move stop to low of the breakout.
  • 9. Technical Analysis: Wedge pattern Break through HOD/resistance. Wedge visible on multiple time frames. Low volume in consolidation. Elevated volume when price breaks out of wedge. Pattern with higher lows and lower highs. Tight pattern! Holds above premarket/ opening range high.