How to Trade Earnings Gap Downs Without Losing Your Shirt 🎯

Why It Matters

Because earnings‑driven gaps are frequent and volatile, a VWAP‑based, low‑risk entry lets traders capture upside while limiting losses, improving overall portfolio resilience.

Key Takeaways

• Use VWAP-to-VWAP gap reversion for earnings-driven down gaps.
• Enter after fakeout shakeout when price holds above VWAP.
• Set stop loss around $0.50 risk per trade.
• Target next multi‑timeframe VWAP levels as profit zones.
• Strategy yields ~90% directional success on post‑earnings moves.

Summary

The video teaches a systematic approach to trading earnings‑driven gap‑down stocks by exploiting VWAP‑to‑VWAP reversion. The presenter, a trader since 1996, argues that this method is the simplest and most reliable he’s used since adopting VWAP exclusively in 2012.

The core signal is a gap‑down at the open followed by a ‘fake‑out shakeout’: price briefly breaks a new low, then fails to stay below the day’s VWAP and rebounds. When the candle closes above VWAP, the trader enters long, placing a tight stop roughly $0.50 away. The next multi‑timeframe VWAP—prior‑day or intraday—serves as the profit target.

Examples include UNFI, which showed the described pattern and held above VWAP, and a 1535‑ticker that was bought after earnings, sold partially at a whole‑number level, and exited when the VWAP was retested. The author notes that when price clears both the current and prior‑day VWAP, it trends in that direction about 90% of the time.

If replicated, the technique offers a low‑risk, high‑probability entry for traders seeking to capture post‑earnings volatility without large drawdowns. Its reliance on objective VWAP levels also reduces discretionary bias, making it scalable across markets.

Original Description

"I’ve been trading exclusively with VWAP since 2012. I’ve never seen anything this easy to understand that works this well." 🏛️🛠️

If you are trying to navigate a highly volatile, choppy stock market by drawing random trendlines or guessing where the bottom is on a crashing stock, you are playing a losing game. The algorithms don’t care about your retail chart patterns—they care about volume-weighted average price.

In this vertical trading masterclass, execution specialist Kenny Glick breaks down the explicit mechanics behind his premium Gap Reversion strategy using real intraday setups on United Natural Foods ($UNFI) and SailPoint ($SAIL):

The Gap Reversion Checklist:

📉 The Setup: Locate a high-volume equity that has gapped down significantly overnight due to an earnings report.

🍑 The Fake Out / Shake Out: At the open, let the stock flush and break to a scary new low. This flushes out the weak retail longs and traps late short-sellers.

🔵 The Confirmational Cross: The moment the price punches back up through the Intraday VWAP (the blue line) and holds it from on top, you buy.

📐 The Calculated Risk: Your maximum risk is defined down to the penny by placing your physical stop-loss right at the bottom of those morning low candlesticks.

🟠 The Target Finish: Scale out at psychological whole numbers while targeting a complete macro reversion back to the multi-day Anchored VWAP (the orange line).

When a stock breaks both today's intraday line and the prior day's baseline, it trends in that direction 90% of the time. Stop guessing and start executing with data.

📊 Want to cleanly map out prior-day anchored lines and track intraday volume-weighted support levels? Build your custom template for free on Barchart: https://www.barchart.com/my/custom-chart-templates/interactive

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