Historically, most of my success has come from trading on the long side. Up until 2018, we were in a bullish continuation market, so buying earnings-driven continuation breakouts made sense to me. Now that I have access to a dedicated earnings scanner, I realize that there is a ton of opportunity for shorting. Here's a strategy I've been feeding into my automated trading platform recently that has made some serious money.
It's pretty simple and is basically the inverse of my post-earnings continuation strategy on the long side. Locate stocks that are down more than 10% from the earnings day open, short as they cross below support, and hold for a few days. More specifically, this strategy will either hold for 5 days or take profits at 15%. This is what the equity curve looks like in the Q2 backtest.
And a few more performance metrics about the strategy:
And a few position-management details:
I got a recent trade on $OPTN, so let's use that chart as an example of what the pattern looks like.
Here is a link to the screener I've been using to locate these stocks: https://earningswinner.io/screener/DSeQFvskdF9IvnmsQNVJ