Trade Opportunity Case Study of the Week: U Earnings Gapper – | Feb 22, 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

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 continued the chop we have seen. In environments like this more selectivity is required. I wrote an educational article on trading during choppy conditions: Read Here

Here are stock moves worth reviewing from this past week:

CELH Intraday Base Breakout on the Earnings Gap

KRYS Oops Reversal/ Earnings Pivot breakout

AXSM flag breakout

SMCI range breakout/ Upside reversal follow through

However, U will be the opportunity we are focusing on today. It showed a Earnings Gapper day 1 entry on the opening range breakout/ VWAP reclaim setup

U Daily Chart:

U 5 minute Chart:

Discovery

To get Unity 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 and example of what it looks like.

You can also setup a similar screen to look for Gap ups in the morning. You should then review the catalyst.

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 U 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 of the opening moments of U

Entry 1: Off the Open

This entry tactic is reserved for high conviction trades. For me Unity does not quite fit the bill. The goal here would be to enter almost immediately managing risk below the low of the day. The strongest gaps will go right away but often there is a range that forms.

In this case if you entered the first few minutes managing risk as the low of the day you would have stayed in the trade with a good cost.

Entry 2: Early ORB anticipation

This is a more classic entry, with U breaking higher after a short range looking to complete the 5 minute opening range breakout. However, this would would have likely stopped you out as the low of the bar was taken out. An earlier entry on this same bar would have been on the VWAP reclaim, but this still would have likely been stopped out

Entry 3: Lower ORB anticipation/ Range Breakout

This is likely the best risk/reward entry as U set up a short range just below the daily VWAP and broke above the inside bar. With about 1.5% risk to the swing low, you could have comfortably put on a 20% position if desired which would yield a 20*.015 = 0.3% portfolio risk.

From this entry U immediately rallied so you had no heat on the trade. I like these entry points which occur near a retest of the day’s lows

Entry 4: VWAP Reclaim

The strongest earnings gap and gos trend above the daily VWAP after breaking above. This entry would have been very close to Entry 3 and you could manage risk tightly just below the VWAP or the low of the bar where it broke through. Again you had cushion right away, suggesting this was a strong entry point.

Opening Range Breakout:

the quick opening range breakout for U was a bit stretched intraday short term. However as it tightened above it I think it would be a valid entry, although likely stopping you out as it was undercut. Like base pivots on daily charts, the opening range pivot often has a lot of volatility around it.

Entry 5: Range Breakout at the intraday 21ema

This entry tactic was close to the opening range and I love the tightening action against the intraday 21ema above the daily VWAP. It sets up a clear pivot and strong breakout move. You get traction and a solid cushion into the end of the day.

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.

Unity closed the day strong, actually setting up a few late entry points from the intraday base. From any of the entries near the open you had above 6-11% cushion into the close, allowing you to hold through to the next day if a swing/position trader

The next day we gapped up. Swing traders should immediately be thinking about selling at least some into strength. U pushed strongly off the open at its peak gaining about 10% from the previous close and above R2. Swing traders would be looking to sell more hear and then trailing the rest using an MA or other level like the daily VWAP.

Then U, U turned and broke below the 5 min 10ema and daily VWAP, sell signals for short term traders

After the pullback U based out the rest of the day above the intraday base pivot from the day before. Given the strong reversal in the QQQ it actually showed good RS

On a daily chart you do see the significant reversal and some more pull back may be expected, especially given the context of the market.

However if you are a position trader and got a good cost near the day 1 open you may still be holding a portion to look for a bigger move if the market can stabilize.