If You Bought Every Stock That Gapped Up in June, Would You Be Green or Red?

Hello dear readers,

Have you ever wondered if it's more common for stocks to gap up and continue to go up (aka "Gap and Go"), or to gap up and fall (aka "Gap and Crap")?

By "continuing to go up" I mean that, if a stock gaps up, that its daily close price will be higher than its open price.  Conversely for "continuing to go down", meaning that the daily close will be lower than the open price.

Just to be crystal clear, here's an example from AMRN on July 2 to illustrate "continuing to go up".

1 minute intraday chart of AMRN on July 2 showing open & close price



In the case above, if you bought at the open and sold at the close you would have made a nice 8.6%.  Is that common?  Is it more common for a gap up to fade?   If you bought every stock that gapped up, would you ultimately be green (made a profit) or red (made a loss)?

So to answer this question, let's take every stock that has gapped up in June over 15%, and pretend that we bought right at the open and sold at the close.  Here, I will take out all stocks that had 0 premarket volume and also stocks getting bought out for cash.  That leaves us with 43 samples.

Gappers in June


NovaBay Pharmaceuticals $NBY was the most massive gainer in June, gapping up 243% and giving you a day-gain of 182% if you bought at the open and sold at the close.

NBY 1 minute intraday chart on the day if closed up 878%


ContraVir Pharmaceuticals $CTRV was the biggest crapper in June, gapping up 157% and giving a day-gain of -45% if you bought at the open and sold at the close.

CTRV 1 minute intraday chart on the day it closed up 41%


So what do the final results show?

To measure the results, let's assume you put the same dollar amount into each trade.  For simplicity, lets say you bought $10,000 of stock, regardless of the stock price, at the open, and sold the entire position at the closing bell.

The results would be:

[[...drumroll please...]

You would be UP 49.4% or $4,900 over the month of June.

That's green baby.

The results come largely from the 2 outsized runners this month.  $NBY running 182% and $KERN running 140%.
 
What are your thoughts?  Are you more of a long-based trader or short-seller?  Leave your comments below.

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Comments

shihong posted -
I executed several trades based on the Behind the Bid pre-market show's information in June. Roughly speaking, while buying in premarket I was unable to make any money. Buying at or just after the opening bell (usually between 9:45am to 10:30am ) my account gained 4% overall from these trades. I've learned not to be greedy and lower my risk by just taking much smaller positions and lowering my goals. Behind the Bid offers daily opportunities to increase an investor's range of trading, especially in the pharmaceuticals where I have limited exposure to previously. Thank you 
TradingForFreedom posted -
It will be interesting to see what the results are for July and other months. My guess is that it will be very different every month. Personally, I've got problems buying a stock that went up >100% the day before... I like to see where a stock is in its own trend using tools like Elliot Waves/Fibonacci and trade the stock accordingly (long or short).
Nana Yaw posted -
l do take long positions but most of my positions are shorts, l put together this to see if performance varies in relation to eps, revenue and catalyst Most of these companies  from June that gapped up provided both Long and short opportunities with positive r/r a common theme for these stocks were the presence of a strong or significant catalyst, apparently most  stocks that gap up on earnings usually closes below their open price.
                   Unfortunately l couldn't establish any viable repeatable  traits or patterns that were common among  these gappers obviously this isn't an adequate sample space to formulate or base any  trades off.
Anybody with viable goto routine for trading gapped up stocks should kindly share.   


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