GDOT is a great example of how to play using BGUs. Notice a) the volume signature and b) how each BGU does not violate the low of the candle (stops can be placed 2-3% below the low of the BGU candle).
A buyable gap-up (BGU) is a powerful buy signal that should meet the following criteria:
1. Buyable gap-ups should occur in fundamentally sound and leading stocks, or there should be a compelling thematic basis for consideration.
2. A buyable gap-up move, in other words the height of the gap-up “rising window,” should be at least 0.75 times the stock’s 40-day Average True Range. In most cases, however, one can simply “eyeball” the gap as being of a substantial and powerful nature. Small gap-ups are not what we’re looking for here.
3. A buyable gap-up move should occur on volume that is at least 1.5 times average daily trading volume.
4. Buyable gap-ups should occur within an uptrend or constructive consolidation, not while a stock is in a downtrend. In the case of a “bottom-fishing” buyable gap-up (BFBGU) the gap can occur coming out of a low base consolidation as a stock is trying to round out the lows of and recover from a prior intermediate- to longer-term decline.
5. A buyable gap-up should hold above the intraday low of the gap-up day, and one can therefore use the intraday low of the gap-up day as a selling guide.
Examples of buyable gap-ups: TSLA on May 9, 2013, NVDA on May 13, 2016, and BABA on August 11, 2016.
Examples of bottom-fishing buyable gap-ups: AMBA on June 3, 2016 and CUDA on July 8, 2016.
This instructional video explains a buyable gap-up in more detail.
Reference: gilmoreport(dot)com/education/gilmo-glossary/
A buyable gap-up (BGU) is a powerful buy signal that should meet the following criteria:
1. Buyable gap-ups should occur in fundamentally sound and leading stocks, or there should be a compelling thematic basis for consideration.
2. A buyable gap-up move, in other words the height of the gap-up “rising window,” should be at least 0.75 times the stock’s 40-day Average True Range. In most cases, however, one can simply “eyeball” the gap as being of a substantial and powerful nature. Small gap-ups are not what we’re looking for here.
3. A buyable gap-up move should occur on volume that is at least 1.5 times average daily trading volume.
4. Buyable gap-ups should occur within an uptrend or constructive consolidation, not while a stock is in a downtrend. In the case of a “bottom-fishing” buyable gap-up (BFBGU) the gap can occur coming out of a low base consolidation as a stock is trying to round out the lows of and recover from a prior intermediate- to longer-term decline.
5. A buyable gap-up should hold above the intraday low of the gap-up day, and one can therefore use the intraday low of the gap-up day as a selling guide.
Examples of buyable gap-ups: TSLA on May 9, 2013, NVDA on May 13, 2016, and BABA on August 11, 2016.
Examples of bottom-fishing buyable gap-ups: AMBA on June 3, 2016 and CUDA on July 8, 2016.
This instructional video explains a buyable gap-up in more detail.
Reference: gilmoreport(dot)com/education/gilmo-glossary/
Comment:
Also an objective, systematised strategy for playing earnings with defined risk. Reference: "In the Trading Cockpit" by Chris Kacher and Gil Morales.