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Watch full video ↗The speaker discusses a strategy of waiting for a pullback to a volume profile level before entering a long position on OKTA. This approach is based on avoiding buying at a surge to the upside and instead waiting for a more favorable entry point. The speaker also mentions that they avoid momentum trading and prefer to wait for a pullback to a volume profile level before entering a trade.
The speaker suggests using XLV (a healthcare ETF) as a correlated trade to benefit from the sympathy move of earnings-related stocks like UNH, without paying for the heightened implied volatility in individual stocks. This approach leverages the correlation between healthcare and other sectors during earnings cycles.
The speaker emphasizes the importance of identifying relative outperformers within sectors, particularly focusing on stocks with strong open interest and volume. They suggest that lower-weighted stocks within a sector can show movement, even if the sector as a whole is not performing strongly. This approach involves scanning for stocks that have shown positive performance on the month and have sufficient liquidity, as indicated by open interest and bid-ask spreads.
The market typically experiences a 'vault crush' following earnings announcements, with the intraday movement providing insights into implied volatility. Two days after earnings, the market is said to have 'digested the whole move,' allowing traders to assess the situation more clearly. This period is crucial for traders waiting for opportunities, especially in sectors like tech where earnings can significantly impact stock prices.
The speaker discusses their approach to earnings trading, emphasizing the importance of waiting for a pullback to a volume profile level before entering a trade. They also mention their preference for the 6-4 week run-up into earnings and their strategy of buying calls during this period.
TakeawayThe speaker suggests waiting for a pullback to a volume profile level before entering a trade, rather than immediately buying at a surge to the upside.
Earnings announcements typically lead to a 'vault crush' in the morning, with the market digesting the move over the following days. This period allows traders to assess implied volatility and identify opportunities.
TakeawayTraders should monitor the market for the 'vault crush' and assess the implied volatility two days after earnings to identify potential opportunities.