I play patterns that react in a predictable manner a good percentage of the time. In the case of stocks' gapping up on earnings news, the percentages tell me they will drop either right at the open or after a quick upward spike. As you can see from the attempts above, they don't always react in the expected manner, but over time the percentages work out in my favor. More wins than losses. In the end I come out ahead.
Losses are all part of trading, and the goal is to minimize the losses and maximize the gains.
Those who play earnings by front-loading the release the night before are flipping a coin. This past week, those who flipped the coin and banked on good earnings won the toss. The earnings news could just as easily been poor and the stocks would have gapped down, creating large losses. This increases my winning percentages and limits my losses. This column is intended to provide general information about momentum trading.