Trade Opportunity Case Study of the Week: OKTA Earnings Gapper – | Mar 8, 2025

The Trade Opportunity

The purpose of this weekly article is to analyze the top trading opportunity of the past week. This is to improve our identification and execution of high quality trade ideas that meet our setup requirements.

Each article will focus on a stock that meets one of three of the main categories of setups I trade:

• Range Breakout / VCP / tight area breakout
• Pullback to Support/ Key moving average
• Gapper / Post Gap Setup

These articles are like taking a step into the batting cage and loading up a historical at bat from an Ace pitcher in the world series – they will help you prepare and execute in future situations by studying important moments from the past.

The setups we cover will appear again and again in each market cycle

So far we have covered these case studies:
Previous article covering the BE Day 1 Gapper Setup
Previous article covering the AI Day 3 Gapper Setup
Previous article covering the DOCS Post Gap Range Breakout Setup
Previous article covering the ALAB Range Breakout Setup
Previous article covering the NVCR Range Breakout Setup
Previous Article on QMCO Range Breakouts
Previous Article on CRNC Episodic Pivot
Previous Article on VST 10 EMA Pullback
Previous Article on HIMS Range Breakout
Previous Article on TEM Opening Range Breakout
Previous Article on U Gapper Day 1 Setup


I also have the following Educational Articles which expand more on Setups/Entry Tactics.
Oops Reversal Entry Tactic

Please let me know in the comments what other topics you would like me to write about.

This past week the Market continued to correct and selectivity and a high cash position have been key. I wrote an educational article on trading during choppy conditions: Read Here and also how to trade a market rally

Here are stock moves worth reviewing from this past week:

TGTX Earnings Move and flag breakout up 27% on the week. Biotech has been the strongest theme to the long side

OKTA earnings Gap and follow through move

BILI positive expectation breaker after the 21ema pullback with China theme also leading. Up 15% in 5 days

BJ Earnings Breakout and follow through, up 12% in 2 days

HIMS short entry on the downside reversal off the 21ema and failed range breakout

BROS failure at earnings gap low, down 20% in 4 days. There are a lot of similar examples of names that broke lower significantly this week after testing a key level or declining MA.

RDDT broke expectations and set up some short entries Thursday.

Today we will be focusing on OKTA since I currently view it as a key leader if it can hold above and near the big weekly level during this correction. It has the potential to start a new stage 2 uptrend

Discovery

To get OKTA on your radar you want to be tracking Earnings Reports and looking for ones that are occurring on large volume.

I use my Earnings Dashboard in Deepvue to review these each day during earnings season. I focus on stocks that are gapping up with at least 30% of average daily volume in the post market.

Here is a excerpt from the Mar 3rd Trade Lab report where I highlighted OKTA’s potential for a gap and go.

Notice how the Post market volume was 100% of the regular average daily volume. That is very significant.

Once you have a screen/process in place to look for gaps. You can then start considering them for your daily focus list the next day

Setup and Execution

The setup for OKTA was a gapper.

For gappers I have 4 main entry tactics I use

• Right off the open for high conviction trades
• Opening Range Breakout/ Base
• VWAP Reclaim
• Intraday Base Breakout

Here is a 5 minute chart OKTA with 5 potential Entries Labeled

For each I noted the entry tactic, where the stop would be, and the result
Heat is the max % drawdown the position experienced, no heat means the entry price was never tested.

Entry 1: AVWAP Reclaim & ORB Anticipation

The first potential entry is on the second 5 minute bar as we reclaim the daily VWAP. Risk could be managed very tightly at the low of the bar and the entry cost was never tested. OKTA respected the daily VWAP and trended above it, as the best breakouts and earnings gaps do.

For stocks that pull in initially like OKTA did, this is often a fantastic entry tactic especially when the stock bursts through it and completes the opening range breakout.

You could have quickly moved your stop up to breakeven ~ 99.60 after the stock gained about 3% from the entry, letting it work until the close where you would be up around 9%.

With an initial ~1% stop loss on the position, you could have position sized aggressively up to 40% of your account and still only be risking 0.4% of your portfolio.

This would be a 40k position in a 100k account or a 4k position in a 10k account.

Entry 2: ORB

This is the next potential entry and occurred the same bar as the AVWAP reclaim. Risk was higher about 2.2% but still very tight.
The entry around 100 would have been tested but you didn’t really have any heat and the intraday base formed above 101.

With a 2.2% position stop you could have sized up to 20% and still be risking less than 0.5% of your account.

Entry 3: Intraday Base Breakout

After the initial surge higher, OKTA began forming an orderly intraday base and this entry occurred after it pushed off the AVWAP and set up a nice consolidation pivot around 103.

The pivot was through the 2 tight bars and risk could be managed very tightly less than 1% around 0.75%.

There wasn’t anything wrong with this entry but OKTA did pull back in and undercut the stop. It simply needed more time to form out the intraday base.

Entry 4: AVWAP Reclaim

As OKTA pulled back from the failed prior entry, it undercut the AVWAP and the key prior higher low of the base. It then quickly reclaimed the AVWAP which yielded the next potential entry point around 102.28

Risk could be managed at the recent swing low around 101.5 which would be only about 1% position risk.

This entry cost was tested and there was about 0.8% of heat which nearly would have stopped you out as OKTA undercut and reclaimed the daily AVWAP again. At the close you were up 6% from this entry

Entry 5: Intraday Base Range Breakout

This entry set up just over 103.10 as OKTA moved up the right side of the intraday base and tightened against the 21ema.

A stop at the 21ema would have been less than 1% risk and OKTA immediately pushed from this entry so you had no heat and were up 5% at the close.

Decision time: 3pm-4pm

Post 3pm each day is what I call decision time. It’s the period where whatever trades you placed that day need to be reviewed to see if you have enough cushion to hold through the next day.

From the entries discussed you had about 5%-9% cushion. Typically this would certainly have been enough to hold though. However with the market context there is the question of wether to take any profits and run. The QQQ was closing negatively and OKTA was showing very strong RS.

For me 5% would be enough cushion to hold through and see if OKTA could continue pushing but any less I would treat it as a day trade.

The Next Day:

The next day OKTA continued to show significant RS holding firm above the intraday 21ema and daily AVWAP even as the market pulled in at the close.

There was the potential for an add or new entry position on the Day 2 daily AVWAP reclaim after OKTA held around the key weekly level.

At the close Entry 5 would have been up ~13%, Entry 1 up ~17% so great cushion and enough to keep holding. Swing traders would also likely be taking some of their position off into strength – 25% to 50% of their positions.

Here are the next few days on 1 65 minute timeframe chart

On Day 3 we tried to rally further but stalled and declined throughout the day under the daily VWAP. depending on your aggressiveness, a swing trade may have quickly taken their position off after the failed follow through and intraday downtrend, protecting gains from the first 2 days.

Position Traders may have simply be sitting with their positions with a stop raised to slightly above breakeven. This level would not be tested.

In this type of corrective market, it’s wise to lean more into a swing trading mindset than position trader, taking gains when you have them and selling to lock in portions, as any day can start with a large gap down.

OKTA pulled in on Day 4 all the way to the confluence of the big weekly level, day 1 close, and day 1 AVWAP. It then bounced nicely showing good respect.

Here is the action on a daily chart:

On a daily chart we can see how OKTA is acting very well. A strong 2 day push and then pulling back in and forming a range. The expectation after showing respect for the day 1 close and weekly level would be that it would be a level to be respected.

A strong close Friday yields the expectation of a post gap u turn and continued upside. That being said the market is still corrective and volatile, and even stocks showing very strong RS have seen sharp reversals.