Today I am going to dismantle one of my favorite plays, gainers. The only catch is, you have to put it back together again once I take it apart. A good example of a predictable gainer would be a company that reports positive earnings after the bell. There are many variables, but usually the stock rises on anticipation of earnings then gaps up the next day. The normal pattern I see for gainers that gap up is to sell off immediately then bounce as traders and investors react to the good news and buy.
Weaker stories sell off more at the first dip than stronger stories.
A gainer that gaps up on a very strong story will normally either sell off a small bit immediately then bounce or it will take off from the open with little or no dip. Remember, not only does the street overreact to bad news, but to good news also. Shorting at the open is a method to take advantage of this overreaction. To increase my winning percentages, I keep a tracking diary that records how all my patterns are currently reacting. If I note that strong gainers are currently gapping up, selling off immediately then bouncing on the first dip, I then have a rough idea of what to expect .