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How to handle UPST with Q3 2021 earnings pending?

Original full question: We had pocket pivot on UPST on August 2nd and than it came back and than on Er it ripped can you explain how to trade this like entry sl

Answer:

$UPST was on my watchlist well before august (see attached tweet). If you payed attention it was easy to pick up the 4 weeks closing tight following the break off the highs starting in mid june. That action put the stock on top of my watchlist right away. Weeks which close tight like that are the breeding ground for my favorite setups after all. That’s golden Bill O’Neil stuff right there.

Stock created an extremely sharp PLL zone with two distinct PLLs inside. In the following weeks it printed several proper Quiet & Tight (QTS) trigger days within the larger multi week quiet and tight phase. After the QTS’s, Pocket Pivots (PP) followed as logical bullish confirmation/clues. Recall that I never act on Pocket Pivot but rather the QTS before. But seeing PPs improves my conviction on the prior QTS’s.

Daily chart of UPST showing various proper setups and bullish clues.

Even after the first PP there was an immediate follow up QTS.

However as earnings came closer one had to let go of the stock. Gambling on earnings is a suckers game. If one entered on the first proper QTS below the PLL zone (tough one) then the profit cushion going into earnings was 16%. If one halves the position before earnings it would require roughly a -25% drop to turn this trade unprofitable. This would be accordance to my rules. However the other possible QTS entries would have created less of a profit cushion and sitting through earnings would have been tougher. It didn’t do it in this case. It is always a matter of positioning so that a -25 to -30% drop won’t exceed your initial stop loss aka your max risk your are willing to lose on any trade.

On earnings day the stock provided us with a strong momentum gap setup (MGS). This is a proper setup as you all know and how I would handle it is explained in detail here.

If one entered on the PPs, the stop loss was easy to place with regard to the two distinct PLLs! Distance from top of the PP day to logical stop was around 8% for the first one on august 2nd and less for the second one. 8% stop loss distance would translate to a position size of 19% for the trade assuming the max amount you are willing to lose on the trade is 1.5% of your portfolio. Technique and math to calculate your size based on the logical stop levels of the chart at hand is explained here in this article ( 1.5% / 8 % = 19% ).

3 days after the proper momentum gap setup the stock triggered a logical partial scale-out as it broke out of it’s base and triggered my 10% scale-out rule. After that it was a matter of sitting tight.

Price simply resolved higher along the 10d MA as the market did it’s magic.

My rule set allows me to handle trades without much room for thinking (which is a good thing). I simply act on my signals and my proven stock handling rules.

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