Richard Moglen

Trade Opportunity Case Study of the Week: NET Earnings Gap Day 1 Entry – | November 2025

Richard Moglen

Stock Trader & Student of the Markets. I help traders improve their systems & performance at TraderLion & Deepvue

November 2, 2025

6 min read

The Trade Opportunity

The purpose of this weekly article is to analyze the top trading opportunity of the week. 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

Important! I will be doing a webinar on trading earnings gaps. Be sure to register by clicking here:

These articles are like taking a step into the batting cage and loading up a historical at bat from a 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

The market this week we pushed from last week’s inside action and made new highs after testing the 21ema. Earnings season is here and we’ve started to see gappers.

For this week we will be focusing on NET which had an earnings gap up from a base into new all time highs.

We will be focusing on Day 1 opportunities (The Day of the gap)

Discovery – NET

To catch strong moves you need to have processes in place to get names capable of them on your radar. Think of setting up a funnel system for each of your setups. Distill the characteristics you want it to exhibit and create screens that look for those.

To catch an Earnings Gap you need to monitor for gap ups post and per market and analyze their catalysts

I have a dashboard setup on Deepvue that helps me with this. I review this nightly & each morning and add any stocks to a watchlist that stand out to review their catalysts

Here is the Post Movers dashboard from 10-30. NET was up over 8% on over 30% average volume. This is the cutoff I usually use to consider it potentially actionable the next day.

I use a variation of the following prompt to analyze reports for key info.

“Analyze NET’s most recent earnings report from Thursday morning, what stands out as important and significant, what did they say about revenue, earnings growth, margins, buy backs, new products/developments or future guidance
Give the key results in 20 bullets”

Revenue $562.0M, up 31% y/y (2nd straight quarter of accel). cloudflare.net
GAAP gross margin 74.0% (vs 77.7% a year ago). cloudflare.net
Non-GAAP gross margin 75.3% (vs 78.8% a year ago). cloudflare.net
GAAP operating loss $(37.5)M (-6.7% margin). cloudflare.net
Non-GAAP operating income $85.9M (15.3% margin). cloudflare.net
GAAP net loss narrowed to $(1.3)M (~$0.00/share). cloudflare.net
Non-GAAP EPS $0.27 (vs $0.20 a year ago). cloudflare.net
Operating cash flow $167.1M (up from $104.7M y/y). cloudflare.net
Free cash flow $75.0M (13% FCF margin), up from $45.3M (11%). cloudflare.net
RPO growth strong: total RPO +43% y/y; current RPO +30% y/y. cloudflare.net
Cash & investments $4.04B at 9/30/25—ample balance-sheet flexibility. cloudflare.net
Q4 guide: revenue $588.5–$589.5M; non-GAAP op income $83–$84M; non-GAAP EPS ~$0.27 (≈377M diluted shares). cloudflare.net
FY25 guide raised: revenue $2.142–$2.143B; non-GAAP op income $297–$298M; non-GAAP EPS ~$0.91 (≈370M shares). cloudflare.net
Margins: non-GAAP operating margin tracking mid-teens; GAAP still negative but improving. cloudflare.net
No share repurchase/buyback disclosed in the release. cloudflare.net
Product/strategy callout: management emphasized rapid product shipping and “connectivity cloud” platform breadth (CEO letter). cloudflare.net
Leadership change: President of Product & Engineering CJ Desai stepping down Nov 7, 2025 (taking CEO role elsewhere). cloudflare.net
Overall read-through: growth re-accelerating, strong bookings (RPO), solid FCF; gross margin down y/y but operating leverage improving. cloudflare.net

Basically, strong growth, and the key point, guidance raise.

Setup and Execution

For earnings gap’s I’m most often looking to enter very shortly off the open using these potential entry tactics

Opening Range Breakout (1 or 5 Minute)
Daily AVWAP Undercut and Rally
Intraday Range/Base Breakout

My preferred entry happens in the first 10 minutes of the trading day, the stock forms a short intraday pullback, undercuts the AVWAP and then reclaims it. In the strong names the stock then breaks out of the opening range and never looks back, trending above the daily AVWAP and intraday moving averages and closing strong.

Gapper Day 1 entries are the only time i’m looking at sub 5 minute charts and I quickly get off them once the stock is trending.

Here is NET on a 1 min

The AVWAP reclaim (Entry 1) is my preferred entry tactic. Notice how NET looked to selloff and then didnt, that was the tell to try it on the AVWAP reclaim. This entry requires some fast thinking.

NET also formed a range and had 2 additional AVWAP range reclaims and then an intraday base breakout. All of these were sound and provided adequate risk/reward.

For each of those note how I track the profit cushion by EOD and also the heat experienced which would be the drawdown from the entry. None of these experienced enough heat for a stop out even with less than ~2% stops.

With a 2% stop you could size up to 20% of your portfolio while risking less than 0.4% of your account.

From these entries NET powered higher before basing and gradually rising into the close and holding above the rising AVWAP. I like the strong close at near highs.

Future thoughts

NET has had a strong Day 1, however cushion on those entries is not huge. At this point stops would be at breakeven. In an ideal world NET powers higher and reconfirms day 2 to start the week on Monday. That would be the best sign that these entries will work. In the morning it may retest the Day 1 AVWAP but should respect it.

However NET has within it’s right to consolidate and tighten here for a few days and then reconfirm. However if we take out the Gapper Day 1 lows that would be a negative.

On a weekly we can see that in addition to a breakout from a 7 week base, NET is pushing into new all time highs above the 2021 levels. This is a positive along with the re-invigorated improvement in earnings.